UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 001-39443
NETSTREIT Corp.
(Exact name of registrant as specified in its charter)

Maryland84-3356606
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
5910 N. Central Expressway2021 McKinney Avenue
Suite 16001150
Dallas, Texas7520675201
(Address of principal executive offices)(Zip Code)
(972) 200-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $0.01 per shareNTSTThe New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐☒Accelerated filer☐
Non-accelerated filer☒☐Smaller reporting company☐
Emerging growth company☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of October 26, 202125, 2022 was 39,624,924.54,876,295.



NETSTREIT CORP. AND SUBSIDIARIES
TABLE OF CONTENTS

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PART I — FINANCIAL INFORMATION
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PART II – OTHER INFORMATION
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Table of Contents
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(inIn thousands, except share and per share data)
(Unaudited)

September 30,December 31,September 30,December 31,
2021202020222021
AssetsAssetsAssets
Real estate, at cost:Real estate, at cost:Real estate, at cost:
LandLand$257,034 $189,373 Land$380,092 $299,935 
Buildings and improvementsBuildings and improvements533,927 358,360 Buildings and improvements839,305 626,457 
Total real estate, at costTotal real estate, at cost790,961 547,733 Total real estate, at cost1,219,397 926,392 
Less accumulated depreciationLess accumulated depreciation(24,184)(10,111)Less accumulated depreciation(53,255)(30,669)
Property under developmentProperty under development9,472 — Property under development17,475 17,896 
Real estate held for investment, netReal estate held for investment, net776,249 537,622 Real estate held for investment, net1,183,617 913,619 
Assets held for saleAssets held for sale138 14,802 Assets held for sale23,985 2,096 
Mortgage loans receivable, netMortgage loans receivable, net46,406 — 
Cash, cash equivalents and restricted cashCash, cash equivalents and restricted cash27,644 92,643 Cash, cash equivalents and restricted cash16,190 7,603 
Lease intangible assets, netLease intangible assets, net109,403 75,024 Lease intangible assets, net149,357 124,772 
Other assets, netOther assets, net14,071 5,724 Other assets, net54,087 20,351 
Total assetsTotal assets$927,505 $725,815 Total assets$1,473,642 $1,068,441 
Liabilities and equityLiabilities and equityLiabilities and equity
Liabilities:Liabilities:Liabilities:
Term loan, net$174,274 $174,105 
Term loans, netTerm loans, net$373,202 $174,330 
Revolving credit facilityRevolving credit facility17,000 — Revolving credit facility30,000 64,000 
Mortgage note payable, netMortgage note payable, net7,901 — 
Lease intangible liabilities, netLease intangible liabilities, net22,150 16,930 Lease intangible liabilities, net31,438 23,316 
Liabilities related to assets held for saleLiabilities related to assets held for sale— 399 Liabilities related to assets held for sale416 — 
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities9,158 6,308 Accounts payable, accrued expenses and other liabilities21,200 16,980 
Total liabilitiesTotal liabilities222,582 197,742 Total liabilities464,157 278,626 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies
Equity:Equity:Equity:
Stockholders’ equityStockholders’ equityStockholders’ equity
Common stock, $0.01 par value, 400,000,000 shares authorized; 39,617,805 and 28,203,545 shares issued and outstanding, respectively396 282 
Common stock, $0.01 par value, 400,000,000 shares authorized; 54,876,295 and 44,223,050 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectivelyCommon stock, $0.01 par value, 400,000,000 shares authorized; 54,876,295 and 44,223,050 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively549 442 
Additional paid-in capitalAdditional paid-in capital706,312 501,045 Additional paid-in capital1,032,634 809,724 
Distributions in excess of retained earningsDistributions in excess of retained earnings(28,326)(7,464)Distributions in excess of retained earnings(58,747)(35,119)
Accumulated other comprehensive incomeAccumulated other comprehensive income2,187 235 Accumulated other comprehensive income25,335 4,123 
Total stockholders’ equityTotal stockholders’ equity680,569 494,098 Total stockholders’ equity999,771 779,170 
Noncontrolling interestsNoncontrolling interests24,354 33,975 Noncontrolling interests9,714 10,645 
Total equityTotal equity704,923 528,073 Total equity1,009,485 789,815 
Total liabilities and equityTotal liabilities and equity$927,505 $725,815 Total liabilities and equity$1,473,642 $1,068,441 


The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(inIn thousands, except share and per share data)
(Unaudited)

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
RevenuesRevenuesRevenues
Rental revenue (including reimbursable)Rental revenue (including reimbursable)$15,603 $9,652 $41,333 $22,277 Rental revenue (including reimbursable)$24,339 $15,603 $67,309 $41,333 
Interest income on mortgage loans receivableInterest income on mortgage loans receivable674 — 1,671 — 
Total revenuesTotal revenues25,01315,60368,98041,333
Operating expensesOperating expensesOperating expenses
PropertyProperty1,737 624 4,002 1,344 Property2,539 1,737 8,156 4,002 
General and administrativeGeneral and administrative3,776 4,109 10,904 7,841 General and administrative4,552 3,776 13,608 10,904 
Depreciation and amortizationDepreciation and amortization8,074 4,692 21,078 10,153 Depreciation and amortization13,407 8,074 36,137 21,078 
Provisions for impairmentProvisions for impairment— 363 3,539 1,773 Provisions for impairment— — 1,114 3,539 
Transaction costsTransaction costs132 1,241 464 2,969 Transaction costs51 132 704 464 
Total operating expensesTotal operating expenses13,719 11,029 39,987 24,080 Total operating expenses20,549 13,719 59,719 39,987 
Other income (expense)Other income (expense)Other income (expense)
Interest expense, netInterest expense, net(895)(1,018)(2,693)(3,815)Interest expense, net(3,017)(895)(5,708)(2,693)
Gain on sales of real estate, netGain on sales of real estate, net1,955 54 2,452 1,070 Gain on sales of real estate, net143 1,955 2,162 2,452 
Gain on forfeited earnest money deposit— — — 250 
Other incomeOther income— — 36 — 
Total other income (expense), netTotal other income (expense), net1,060 (964)(241)(2,495)Total other income (expense), net(2,874)1,060 (3,510)(241)
Net income (loss) before income tax expense2,944 (2,341)1,105 (4,298)
Net income before income taxesNet income before income taxes1,590 2,944 5,751 1,105 
Income tax expenseIncome tax expense— — (50)— Income tax expense(171)— (356)(50)
Net income (loss)2,944 (2,341)1,055 (4,298)
Net income (loss) attributable to noncontrolling interests96 (263)42 (799)
Preferred stock dividends— 36 — 42 
Net income (loss) attributable to common shareholders$2,848 $(2,114)$1,013 $(3,541)
Amounts available to common shareholders per common share:
Net incomeNet income1,419 2,944 5,395 1,055 
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests16 96 63 42 
Net income attributable to common stockholdersNet income attributable to common stockholders$1,403 $2,848 $5,332 $1,013 
Amounts available to common stockholders per common share:Amounts available to common stockholders per common share:
BasicBasic$0.07 $(0.11)$0.03 $(0.26)Basic$0.03 $0.07 $0.11 $0.03 
DilutedDiluted$0.07 $(0.11)$0.03 $(0.26)Diluted$0.03 $0.07 $0.11 $0.03 
Weighted average common shares:Weighted average common shares:Weighted average common shares:
BasicBasic39,559,605 18,825,389 35,359,551 13,771,457 Basic50,449,735 39,559,605 47,679,870 35,359,551 
DilutedDiluted41,333,579 18,825,389 37,108,425 13,771,457 Diluted51,384,758 41,333,579 48,657,049 37,108,425 
Other comprehensive income (loss):
Net income (loss)$2,944 $(2,341)$1,055 $(4,298)
Other comprehensive income:Other comprehensive income:
Net incomeNet income$1,419 $2,944 $5,395 $1,055 
Change in value on derivatives, netChange in value on derivatives, net5 (128)2,063 (128)Change in value on derivatives, net13,887 5 21,436 2,063 
Total comprehensive income (loss)$2,949 $(2,469)$3,118 $(4,426)
Comprehensive income (loss) attributable to noncontrolling interests95 (281)153 (817)
Comprehensive income (loss) attributable to common shareholders$2,854 $(2,188)$2,965 $(3,609)
Total comprehensive incomeTotal comprehensive income$15,306 $2,949 $26,831 $3,118 
Comprehensive income attributable to noncontrolling interestsComprehensive income attributable to noncontrolling interests149 95 287 153 
Comprehensive income attributable to common stockholdersComprehensive income attributable to common stockholders$15,157 $2,854 $26,544 $2,965 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(inIn thousands, except share data)
(Unaudited)

Preferred stockCommon stockCommon stock
SharesPar ValueSharesPar ValueAdditional
Paid-in Capital		Distributions in Excess of Retained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling InterestsTotal EquitySharesPar ValueAdditional
Paid-in Capital		Distributions in Excess of Retained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2020— $— 28,203,545 $282 $501,045 $(7,464)$235 $494,098 $33,975 $528,073 
Balance at December 31, 2021Balance at December 31, 202144,223,050 $442 $809,724 $(35,119)$4,123 $779,170 $10,645 $789,815 
Issuance of common stock in public offering, net of issuance costsIssuance of common stock in public offering, net of issuance costs3,604,736 36 75,461 — — 75,497 — 75,497 
OP Units converted to common stockOP Units converted to common stock— — 253,344 3 4,920 — — 4,923 (4,923)— OP Units converted to common stock25,629 — 484 — — 484 (484)— 
Dividends and distributions declared on common stock and OP UnitsDividends and distributions declared on common stock and OP Units— — — — — (5,687)— (5,687)(307)(5,994)Dividends and distributions declared on common stock and OP Units— — — (8,888)— (8,888)(109)(8,997)
Dividends declared on restricted stock— — — — — (132)— (132)— (132)
Vesting of restricted stock units— — 15,190 — — — — — — — 
Repurchase of common stock for tax withholding obligations— — (4,962)— (90)— — (90)— (90)
Stock-based compensation— — — — 557 — 557 — 557 
Other comprehensive income— — — — — — 2,199 2,199 124 2,323 
Net income— — — — — 701 — 701 40 741 
Balance at March 31, 2021— $— 28,467,117 $285 $506,432 $(12,582)$2,434 $496,569 $28,909 $525,478 
Issuance of common stock in public offering— — 10,915,688109 203,468 — — 203,577 — 203,577 
Offering and related costs of common stock— — —— (9,416)— — (9,416)— (9,416)
OP Units converted to common stock— — 143,1731 2,744 — — 2,745 (2,745)— 
Dividends and distributions declared on common stock and OP Units— — —— — (7,890)— (7,890)(287)(8,177)
Dividends declared on restricted stock— — — — — (132)— (132)— (132)
Stock-based compensation— — —— 1,041 — 1,041 — 1,041 
Other comprehensive loss— — —— — — (253)(253)(12)(265)
Net loss— — —— — (2,536)— (2,536)(94)(2,630)
Balance at June 30, 2021— $— 39,525,978 $395 $704,269 $(23,140)$2,181 $683,705 $25,771 $709,476 
OP Units converted to common stock— — 65,840 1 1,246 — — 1,247 (1,247)— 
Dividends and distributions declared on common stock and OP Units— — — — — (7,916)— (7,916)(265)(8,181)
Dividends declared on restricted stock— — — — — (125)— (125)— (125)
Dividends declared on restricted stock, netDividends declared on restricted stock, net— — — (128)— (128)— (128)
Vesting of restricted stock unitsVesting of restricted stock units— — 35,000 — — — — — — — Vesting of restricted stock units85,224 1 (1)— — — — — 
Repurchase of common stock for tax withholding obligationsRepurchase of common stock for tax withholding obligations— — (9,013)— (229)— — (229)— (229)Repurchase of common stock for tax withholding obligations(16,651)— (362)— — (362)— (362)
Stock-based compensation, netStock-based compensation, net— — — — 1,026 7 — 1,033 — 1,033 Stock-based compensation, net— — 1,045 — — 1,045 — 1,045 
Other comprehensive incomeOther comprehensive income— — — — — — 6 6 (1)5 Other comprehensive income— — — — 6,135 6,135 76 6,211 
Net incomeNet income— — — — — 2,848 — 2,848 96 2,944 Net income— — — 1,942 — 1,942 24 1,966 
Balance at September 30, 2021— $— 39,617,805 $396 $706,312 $(28,326)$2,187 $680,569 $24,354 $704,923 
Balance at March 31, 2022Balance at March 31, 202247,921,988 $479 $886,351 $(42,193)$10,258 $854,895 $10,152 $865,047 
Issuance of common stock in public offering, net of issuance costsIssuance of common stock in public offering, net of issuance costs2,397,035 24 49,976 — — 50,000 — 50,000 
OP Units converted to common stockOP Units converted to common stock22,265 — 418 — — 418 (418)— 
Dividends and distributions declared on common stock and OP UnitsDividends and distributions declared on common stock and OP Units— — — (9,588)— (9,588)(104)(9,692)
Dividends declared on restricted stock, netDividends declared on restricted stock, net— — — (149)— (149)— (149)
Stock-based compensation, netStock-based compensation, net— — 1,298 — — 1,298 — 1,298 
Other comprehensive incomeOther comprehensive income— — — — 1,323 1,323 15 1,338 
Net incomeNet income— — — 1,987 — 1,987 23 2,010 
Balance at June 30, 2022Balance at June 30, 202250,341,288 $503 $938,043 $(49,943)$11,581 $900,184 $9,668 $909,852 
Issuance of common stock in public offering, net of issuance costsIssuance of common stock in public offering, net of issuance costs4,512,003 45 93,477 — — 93,522 — 93,522 
Dividends and distributions declared on common stock and OP UnitsDividends and distributions declared on common stock and OP Units— — — (10,073)— (10,073)(103)(10,176)
Dividends declared on restricted stock, netDividends declared on restricted stock, net— — — (141)— (141)— (141)
Vesting of restricted stock unitsVesting of restricted stock units31,865 1 (1)— — — — — 
Repurchase of common stock for tax withholding obligationsRepurchase of common stock for tax withholding obligations(8,861)— (187)— — (187)— (187)
Stock-based compensation, netStock-based compensation, net— — 1,302 7 — 1,309 — 1,309 
Other comprehensive incomeOther comprehensive income— — — — 13,754 13,754 133 13,887 
Net incomeNet income— — — 1,403 — 1,403 16 1,419 
Balance at September 30, 2022Balance at September 30, 202254,876,295 $549 $1,032,634 $(58,747)$25,335 $999,771 $9,714 $1,009,485 


The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents
NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(inIn thousands, except share data)
(Unaudited)

Preferred stockCommon stock
SharesPar ValueSharesPar ValueAdditional
Paid-in Capital		Distributions in Excess of Retained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2019— $— 8,860,760 $89 $164,416 $28 $— $164,533 $87,899 $252,432 
Issuance of preferred stock125 125 — — — — — 125 — 125 
Offering and related costs of preferred stock— (21)— — — — — (21)— (21)
Issuance of common stock in private offering— — 2,936,885 29 57,974 — — 58,003 — 58,003 
Offering and related costs of common stock— — — — (3,444)— — (3,444)— (3,444)
Net loss— — — — — (1,127)— (1,127)(425)(1,552)
Balance at March 31, 2020125 $104 11,797,645 $118 $218,946 $(1,099)$— $218,069 $87,474 $305,543 
Dividends declared on preferred stock— — — — — (6)— (6)— (6)
Net loss— — — — — (294)— (294)(111)(405)
Balance at June 30, 2020125 $104 11,797,645 $118 $218,946 $(1,399)$— $217,769 $87,363 $305,132 
Issuance of common stock in initial public offering— — 13,681,561 136 246,132 246,268 246,268 
Offering and related costs of common stock— — — — (18,947)— — (18,947)— (18,947)
Dividends declared on preferred stock— — — — — (2)— (2)— (2)
Dividends and distributions declared on common stock and OP Units— — — — — (2,430)— (2,430)(419)(2,849)
Dividends declared on restricted stock— — — — — (41)— (41)— (41)
Redemption of preferred stock upon initial public offering(125)(104)— — — (34)— (138)— (138)
Redemption of OP Units and issuance of common stock in initial public offering— — 255,268 3 5,027 — — 5,030 (5,030)— 
Stock-based compensation— — — — 1,753 — — 1,753 — 1,753 
Other comprehensive loss— — — — — — (110)(110)(18)(128)
Net loss— — — — — (2,078)— (2,078)(263)(2,341)
Balance at September 30, 2020— $— 25,734,474 $257 $452,911 $(5,984)$(110)$447,074 $81,633 $528,707 
Common stock
SharesPar ValueAdditional
Paid-in Capital		Distributions in Excess of Retained EarningsAccumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 202028,203,545 $282 $501,045 $(7,464)$235 $494,098 $33,975 $528,073 
OP Units converted to common stock253,344 3 4,920 — — 4,923 (4,923)— 
Dividends and distributions declared on common stock and OP Units— — — (5,687)— (5,687)(307)(5,994)
Dividends declared on restricted stock— — — (132)— (132)— (132)
Vesting of restricted stock units15,190 — — — — — — — 
Repurchase of common stock for tax withholding obligations(4,962)— (90)— — (90)— (90)
Stock-based compensation— — 557 — — 557 — 557 
Other comprehensive income— — — — 2,199 2,199 124 2,323 
Net income— — — 701 — 701 40 741 
Balance at March 31, 202128,467,117 $285 $506,432 $(12,582)$2,434 $496,569 $28,909 $525,478 
Issuance of common stock in public offering, net of issuance costs10,915,688 109 194,052 — — 194,161 — 194,161 
OP Units converted to common stock143,173 1 2,744 — — 2,745 (2,745)— 
Dividends and distributions declared on common stock and OP Units— — — (7,890)— (7,890)(287)(8,177)
Dividends declared on restricted stock— — — (132)— (132)— (132)
Stock-based compensation— — 1,041 — — 1,041 — 1,041 
Other comprehensive loss— — — — (253)(253)(12)(265)
Net loss— — — (2,536)— (2,536)(94)(2,630)
Balance at June 30, 202139,525,978 $395 $704,269 $(23,140)$2,181 $683,705 $25,771 $709,476 
OP Units converted to common stock65,840 1 1,246 — — 1,247 (1,247)— 
Dividends and distributions declared on common stock and OP Units— — — (7,916)— (7,916)(265)(8,181)
Dividends declared on restricted stock— — — (125)— (125)— (125)
Vesting of restricted stock units35,000 — — — — — — — 
Repurchase of common stock for tax withholding obligations(9,013)— (229)— — (229)— (229)
Stock-based compensation— — 1,026 7 — 1,033 — 1,033 
Other comprehensive income— — — — 6 6 (1)5 
Net income— — — 2,848 — 2,848 96 2,944 
Balance at September 30, 202139,617,805 $396 $706,312 $(28,326)$2,187 $680,569 $24,354 $704,923 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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NETSTREIT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(inIn thousands, except share and per share data)
(Unaudited)
Nine Months Ended
September 30,		Nine Months Ended
September 30,
2021202020222021
Cash flows from operating activitiesCash flows from operating activitiesCash flows from operating activities
Net income (loss)$1,055 $(4,298)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net incomeNet income$5,395 $1,055 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization21,078 10,153 Depreciation and amortization36,137 21,078 
Amortization of deferred financing costsAmortization of deferred financing costs471 464 Amortization of deferred financing costs553 471 
Noncash revenue adjustmentsNoncash revenue adjustments(1,289)1,077 Noncash revenue adjustments(2,076)(1,289)
Stock-based compensation expenseStock-based compensation expense2,623 1,753 Stock-based compensation expense3,646 2,623 
Gain on sale of real estate, net(2,452)(1,070)
Gain on forfeited earnest money deposit— (250)
Gain on sales of real estate, netGain on sales of real estate, net(2,162)(2,452)
Provisions for impairmentProvisions for impairment3,539 1,773 Provisions for impairment1,114 3,539 
Changes in assets and liabilities, net of assets acquired and liabilities assumed:Changes in assets and liabilities, net of assets acquired and liabilities assumed:Changes in assets and liabilities, net of assets acquired and liabilities assumed:
Other assets, netOther assets, net(3,879)(4,323)Other assets, net(3,641)(3,879)
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities2,065 2,313 Accounts payable, accrued expenses and other liabilities676 2,065 
Lessee improvement obligationsLessee improvement obligations(1)(1,893)Lessee improvement obligations— (1)
Lease incentive paymentsLease incentive payments(4,004)— Lease incentive payments(936)(4,004)
Net cash provided by operating activitiesNet cash provided by operating activities19,206 5,699 Net cash provided by operating activities38,706 19,206 
Cash flows from investing activitiesCash flows from investing activitiesCash flows from investing activities
Acquisitions of real estateAcquisitions of real estate(292,046)(327,338)Acquisitions of real estate(328,986)(292,046)
Real estate development and improvementsReal estate development and improvements(9,512)(1,268)Real estate development and improvements(15,492)(9,512)
Investment in mortgage loans receivableInvestment in mortgage loans receivable(46,466)— 
Earnest money depositsEarnest money deposits(789)(43)Earnest money deposits(3,486)(789)
Purchase of computer equipment and other corporate assetsPurchase of computer equipment and other corporate assets(52)(51)Purchase of computer equipment and other corporate assets(595)(52)
Proceeds from sale of real estateProceeds from sale of real estate30,436 11,778 Proceeds from sale of real estate13,837 30,436 
Net cash used in investing activitiesNet cash used in investing activities(271,963)(316,922)Net cash used in investing activities(381,188)(271,963)
Cash flows from financing activitiesCash flows from financing activitiesCash flows from financing activities
Issuance of common stock in initial public offering, net— 227,321 
Issuance of common stock in public offering, net194,161 — 
Issuance of common stock in private offering, net— 54,559 
Issuance of preferred stock, net— 104 
Payment of preferred stock dividends— (8)
Issuance of common stock in public offerings, netIssuance of common stock in public offerings, net219,019 194,161 
Payment of common stock dividendsPayment of common stock dividends(21,493)(2,430)Payment of common stock dividends(28,549)(21,493)
Payment of OP unit distributionsPayment of OP unit distributions(859)(419)Payment of OP unit distributions(316)(859)
Redemption of preferred stock— (138)
Payment of restricted stock dividendsPayment of restricted stock dividends(29)— Payment of restricted stock dividends(154)(29)
Proceeds under revolving credit facility30,000 50,000 
Repayments under revolving credit facility(13,000)(50,000)
Proceeds under revolving credit facilitiesProceeds under revolving credit facilities365,000 30,000 
Repayments under revolving credit facilitiesRepayments under revolving credit facilities(399,000)(13,000)
Proceeds from term loansProceeds from term loans200,000 — 
Payments of mortgage note payablePayments of mortgage note payable(12)— 
Proceeds under property development incentivesProceeds under property development incentives605 — 
Repurchase of common stock for tax withholding obligationsRepurchase of common stock for tax withholding obligations(318)— Repurchase of common stock for tax withholding obligations(549)(318)
Deferred offering costsDeferred offering costs(704)— Deferred offering costs(1,220)(704)
Deferred financing costsDeferred financing costs— (75)Deferred financing costs(3,755)— 
Net cash provided by financing activitiesNet cash provided by financing activities187,758 278,914 Net cash provided by financing activities351,069 187,758 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash(64,999)(32,309)Net change in cash, cash equivalents and restricted cash8,587 (64,999)
Cash, cash equivalents and restricted cash at beginning of the periodCash, cash equivalents and restricted cash at beginning of the period92,643 169,319 Cash, cash equivalents and restricted cash at beginning of the period7,603 92,643 
Cash, cash equivalents and restricted cash at end of the periodCash, cash equivalents and restricted cash at end of the period$27,644 $137,010 Cash, cash equivalents and restricted cash at end of the period$16,190 $27,644 
Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:
Cash paid for interestCash paid for interest$2,118 $3,484 Cash paid for interest$4,345 $2,118 
Cash paid for income taxesCash paid for income taxes$45 $— 
Supplemental disclosures of non-cash investing and financing activities:Supplemental disclosures of non-cash investing and financing activities:Supplemental disclosures of non-cash investing and financing activities:
Redemption of OP Units and issuance of common stock upon initial public offering$— $5,030 
Reclassification of deferred offering expenses to additional paid-in capital upon initial public offering$— $4,171 
OP units converted into common stock$8,914 $— 
Dividends declared and unpaid on restricted stockDividends declared and unpaid on restricted stock$382 $41 Dividends declared and unpaid on restricted stock$411 $382 
Deferred offering costs included in accounts payable, accrued expenses and other liabilitiesDeferred offering costs included in accounts payable, accrued expenses and other liabilities$88 $— Deferred offering costs included in accounts payable, accrued expenses and other liabilities$— $88 
Cash flow hedge change in fair valueCash flow hedge change in fair value$2,063 $128 Cash flow hedge change in fair value$21,436 $2,063 
Involuntary conversion of building and improvements and change in related insurance proceeds receivableInvoluntary conversion of building and improvements and change in related insurance proceeds receivable$490 $— Involuntary conversion of building and improvements and change in related insurance proceeds receivable$— $490 
Accrued construction and development costs$345 $— 
Mortgage note assumed at fair valueMortgage note assumed at fair value$7,913 $— 
Accrued capital expenditures and real estate development and improvement costsAccrued capital expenditures and real estate development and improvement costs$952 $345 
Accrued lease incentivesAccrued lease incentives$1,690 $— 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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NETSTREIT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 – Organization and Description of Business

NETSTREIT Corp. (“Successor” or the “Company”Company”) was incorporated on October 11, 2019 as a Maryland corporation and commenced operations on December 23, 2019. The Company conducts its operations through NETSTREIT, L.P., a Delaware limited partnership (the “Operating Partnership”). NETSTREIT GP, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, is the sole general partner of the Operating Partnership.

The Company elected to be treated and to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. Additionally, the Operating Partnership formed NETSTREIT Management TRS, LLC (“NETSTREIT TRS”), which together with the Company jointly elected to be treated as a taxable REIT subsidiary under Section 856(a) of the Internal Revenue Code of 1986, as amended, (the “Code”) for U.S. federal income tax purposes.

The Company is structured as an umbrella partnership real estate investment trust (commonly referred to as an “UPREIT”) and is an internally managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate leased on a long-term basis to high credit quality tenants across the United States. As of September 30, 2021,2022, the Company owned 290or had investments in 409 properties, located in 40 states, including 4 properties under development, with a non-binding option to purchase an additional property under development.

Private Offering and Formation Transactions

On December 23, 2019, the Company completed a series of transactions (collectively the “Private Offering”) pursuant to which the Company sold 8,860,760 shares of common stock at $19.75 per share in a private placement under Rule 144A and Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Private Offering, the Company completed the formation transactions described below. On January 30, 2020, the initial purchaser in the Private Offering exercised its over-allotment option to purchase 2,936,885 shares of the Company’s common stock, which were delivered on February 6, 2020. The Company contributed the net proceeds of $219.0 million from the Private Offering to the Operating Partnership in exchange for 11,797,645 Class A units of limited partnership of the Operating Partnership (“Class A OP Units”). Upon completion of the Private Offering and the over-allotment option, noncontrolling interest holders owned approximately 27.4% of the Operating Partnership (the Operating Partnership issued total Class A and Class B OP Units of 15,449,794 and 796,870, respectively).

Concurrently with the closing of the Private Offering, EverSTAR Income and Value Fund V, LP, a Delaware limited partnership (the “Predecessor”), was merged with and into the Operating Partnership, with the Operating Partnership surviving, and the continuing investors in the Operating Partnership receiving an aggregate of 3,652,149 Class A OP Units, other than the Chief Executive Officer of the Company, who received 8,884 Class B units of limited partnership of the Operating Partnership (“Class B OP Units,” and collectively with Class A OP Units, “OP Units”), and an affiliate of the Predecessor’s general partner, which received 287,234 Class B OP Units.

The Operating Partnership entered into a contribution agreement with EBA EverSTAR LLC, a Texas limited liability company, to internalize the Company’s management infrastructure, whereby EBA EverSTAR LLC contributed 100% of the membership interests in EBA EverSTAR Management, LLC, a Texas limited liability company and the manager of the Predecessor, to the Operating Partnership in exchange for 500,752 Class B OP Units. In connection with the internalization, EBA EverSTAR Management, LLC was re-domiciled in Delaware and its name was changed to NETSTREIT Management, LLC. A 0.01% interest in NETSTREIT Management, LLC was issued to NETSTREIT TRS.

Concurrently with the consummation of the Private Offering, the Company entered into a $175.0 million term loan and $250.0 million revolving credit facility. On December 23, 2019, in connection with the acquisition of the Predecessor, the Company fully drew down on its term loan and used the proceeds to acquire the Predecessor, which concurrently settled its outstanding debt facilities. As part of the acquisition, the Company did not assume any obligations under the Predecessor’s then outstanding debt facilities.


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Series A Preferred Stock

To maintain the Company’s status as a REIT, on January 27, 2020, the Company issued and sold 125 shares of 12.0% Series A Cumulative Non-Voting Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), for $1,000 per share to accredited investors pursuant to Regulation D under the Securities Act. The shares of Series A Preferred Stock may be redeemed solely at the Company’s option for consideration equal to $1,000 per share, plus accrued and unpaid dividends thereon to and including the date fixed for redemption, plus a redemption premium as follows (i) until December 31, 2021, $100 and (ii) thereafter, no redemption premium. The Company redeemed all 125 outstanding shares of Series A Preferred Stock upon the completion of the initial public offering.

Initial Public Offering

On August 17, 2020, the Company completed the initial public offering of its common stock. The Company sold 12,244,732 shares of common stock and selling stockholders sold 255,268 shares of common stock at a price of $18.00 per share. The Company's common stock began trading on the New York Stock Exchange under the symbol “NTST” on August 13, 2020. On September 16, 2020, the Company issued an additional 1,436,829 shares of its common stock pursuant to the underwriters' over-allotment option in connection with the Company's initial public offering. The net proceeds to the Company from the initial public offering was $227.3 million, which is net of transaction costs and underwriter fees of $18.9 million. The Company contributed the net proceeds of the initial public offering and related over-allotment option to the Operating Partnership in exchange for 13,681,561 Class A OP Units. In addition, an equivalent number of Class A OP Units were issued for the 255,268 shares sold by selling stockholders.

April 2021 Offering

On April 12, 2021, the Company completed a public offering of 10,915,688 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,423,785 shares of common stock. Upon closing of the offering, the Company issued 10,915,688 shares of common stock and received net proceeds of $194.2 million after deducting the underwriting discount and transaction costs of $9.4 million. The Company contributed the net proceeds of the offering and related underwriters’ option to the Operating Partnership in exchange for 10,915,688 Class A OP Units.42 states.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP)(“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (SEC)(“SEC”). The accompanying condensed consolidated financial statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation and the Company’s net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests.

Interim Unaudited Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).SEC. These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”)GAAP for complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto on the Annual Report on Form 10-K as of and for the year ended December 31, 2020,2021, which provide a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 20212022 and 20202021 are not necessarily indicative of the results for the full year.

Noncontrolling Interests

The Company presents noncontrolling interests, which represent OP Units, and classifies such interestslimited partnership units in the operating partnership (the “OP Units”) not owned by the Company, as a component of permanent equity, separate from the Company's stockholders’ equity. Noncontrolling interests were created as part of an asset acquisition and recognized at fair value as of the date of the transaction. Effective with the Company’s initial public offering, each limited partner of the Operating Partnership has the right to require the Operating Partnership to redeem part or all of its OP
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Units for cash, based upon the value of an equivalent number of shares of the Company’s common stock at the time of the redemption, or, at the Company’s election, shares of the Company’s common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of the Company’s common stock. The election to pay cash or issue common stock is solely within the control of the Company to satisfy a noncontrolling interest holder's redemption request.

Net income or loss of the Operating Partnership is allocated to its noncontrolling interests based on the noncontrolling interests’ ownership percentages in the Operating Partnership throughout the period. Ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units outstanding.

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Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the useful lives of real estate assets, lease accounting, real estate impairment assessments, and allocation of fair value of purchase consideration. These estimates are based on historical experience and other assumptions which management believes are reasonable under the circumstances. The Company evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known. Further, the uncertainty over the ultimate impact COVID-19 and instability in macroeconomic conditions will have on the global economy and the Company’s business makes any estimates and assumptions as of September 30, 20212022 inherently less certain than they would be absent the current and potential impacts of COVID-19.COVID-19 and instability in macroeconomic conditions. Actual results could differ from those estimates.

Risk and Uncertainties

COVID-19

On March 11, 2020, the World Health Organization announced a new strain of coronavirus (“COVID-19”) was reported worldwide, resulting inThe ongoing COVID-19 being declared a pandemic, and on March 13, 2020 the U.S. President announced a National Emergency relating to the disease. COVID-19 and the measures taken to limit its spread have and may continue to, negatively impactimpacted the economy across many industries, including industries in which our tenants operate. The impacts may continue andand/or increase in severity as the duration of the pandemic lengthens or new variants are identified. As a result,lengthens. The Company continues to monitor the Company is not yet able to determine the full impactglobal outbreak of COVID-19 on its operations, and therefore, whether any such impact will be material.to take steps to mitigate the potential risks to us posed by the pandemic, including the identification and spread of variants. However, the Company’s operations and cash flows during the three and nine months ended September 30, 2021periods presented in the condensed consolidated financial statements were not materially impacted by COVID-19. The Company has collected 100.0% of all rent payments for the three and nine months ended September 30, 2021. In addition, the Company has not provided for any rent abatements or deferrals since August 1, 2020 relating to COVID-19.

The Company also adopted an optional remote-work policy and other physical distancing policies for its corporate office. The Company does not anticipate these policies to have any adverse impact on its ability to continue to operate its business. Transitioning to a remote-work environment has not had a material adverse impact on the Company's general ledger system, internal controls or controls and procedures related to its financial reporting process.

Real Estate Held for Investment

Real estate is recorded and stated at cost less any provision for impairment. Assets are recognized atAt acquisition date, the purchase price of an acquired property is allocated to tangible and identifiable intangible assets or liabilities based on their relative fair value at acquisition date.values. For properties developed by the Company, all direct and indirect costs related to planning, development and construction, including interest, real estate taxes and other miscellaneous costs incurred during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed.

The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore accounted for as a business combination or if the acquisition transaction should be accounted for as an asset acquisition. Under Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets or the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. Transaction costs related to acquisitions that qualify as asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs for acquisitions that are deemed to be acquisitions of a business are expensed as incurred.
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The Company allocates the purchase price of acquired properties accounted for as asset acquisitions to tangible and identifiable intangible assets or liabilities based on their relative fair values. Tangible assets may include land, buildings, site improvements and tenant improvements. Intangible assets include the value of in-place leases and above-market leases and intangible liabilities include below-market leases.

The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases based on the specific characteristics of each tenant’s lease. The Company estimates the cost to execute leases with terms similar to the remaining lease terms of the in-place leases, including leasing commissions, legal and other related expenses. The fair value of above-market or below-market leases is recorded based on the net present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between the contractual amount to be paid pursuant to the in-place lease and the Company’s estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining non-cancelable term of the lease including any below-market fixed rate renewal options for below-market leases. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including real estate valuations prepared by an independent valuation firms.firm. The Company also considers information and other factors including market conditions, the industry
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that the tenant operates in, characteristics of the real estate; e.g., location, size, demographics, value and comparative rental rates; tenant credit profile and the importance of the location of the real estate to the operations of the tenant’s business. Additionally, the Company considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets and liabilities acquired. Based on these inputs for measuring and allocating the fair value of real estate acquisitions, the Company utilizes both observable market data (categorized as level 2 on the three-level valuation hierarchy of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement), and unobservable inputs that reflect the Company’s own internal assumptions (categorized as level 3 under ASC Topic 820).

Depreciation and Amortization

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets:

Buildings13 – 35 years
Building improvements15 years
Tenant improvementsShorter of the term of the related lease or useful life
Acquired in-place leases or leasing commissionsRemaining terms of the respective leases
Assembled workforce3 years
Computer equipment and other corporate assets3 – 5 years

Total depreciation and amortization expense was $8.1$13.4 million and $4.7$8.1 million during the three months ended September 30, 20212022 and 2020,2021, respectively. Total depreciation and amortization expense was $21.1$36.1 million and $10.2$21.1 million during the nine months ended September 30, 20212022 and 2020,2021, respectively.

Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $5.6$9.1 million and $3.2$5.6 million during the three months ended September 30, 20212022 and 2020,2021, respectively. Depreciation expense on real estate held for investment and computer equipment and other corporate assets was $14.5$24.4 million and $7.0$14.5 million during the nine months ended September 30, 20212022 and 2020,2021, respectively.

Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissionscommission costs were $2.5$4.3 million and $1.4$2.5 million during the three months ended September 30, 20212022 and 2020,2021, respectively. Amortization expense on acquired in-place lease and assembled workforce intangible assets and leasing commissionscommission costs were $6.5$11.7 million and $3.1$6.5 million during the nine months ended September 30, 20212022 and 2020,2021, respectively.
Repairs and maintenance are charged to operationsproperty operating expense as incurred; major renewals and betterments that extend the useful life or improve the operating capacity of the asset are capitalized. Upon the sale or disposition of a property, the asset and the related accumulated depreciation are removed from the condensed consolidated balance sheets with the difference between the proceeds received, net of sales costs, and the carrying value of the asset group recorded as a gain or loss on sale, subject to impairment considerations.


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Assets Held for Sale

The Company is continually evaluating the portfolio of real estate assets and may elect to dispose of assets considering criteria including, but not limited to, tenant concentration, tenant credit quality, unit financial performance, local market conditions and lease rates, asset location, and tenant operation type (e.g., tenant or retail sector). Real estate assets held for sale are expected to be sold within twelve months. Properties classified as held for sale, including the related intangibles, on the condensed consolidated balance sheets include only those properties available for immediate sale in their present condition, which are actively being marketed, and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held for sale are carried at the lower of cost or fair value, less estimated selling costs. No depreciation expense or amortization expense is recognized on properties held for sale and the related intangible assets or liabilities once they have been classified as such. Only disposals representing a strategic shift in operations are presented as discontinued operations. Accordingly, we have not reclassified results of operations for properties disposed during the interim period ended September 30, 20212022 or held for sale as discontinued operations as of September 30, 2022, as these events are a normal part of the Company’s operations and do not represent strategic shifts in the Company’s operations. As of September 30, 20212022 and December 31, 2020,2021, there were 1twelve and 3one properties, respectively, classified as held for sale.


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Impairment of Long-Lived Assets

Fair value measurement of an asset group occurs when events or changes in circumstances related to an asset indicate that the carrying amount of the asset is no longer recoverable. An example of an event or changed circumstance is a reduction in the expected holding period of a property. If indicators are present, the Company will prepare a projection of the undiscounted future cash flows of the property, excluding interest charges, and determine if the carrying amount of the real estateasset group is recoverable. When a carrying amount is not recoverable, an impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair market value. The Company estimates fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects, local market information, and with regard to assets held for sale, based on the estimated or negotiated selling price, less estimated costs of disposal. Based on these unobservable inputs, the Company determined that its valuations of impaired real estate and intangible assets fall within Level 3 of the fair value hierarchy under ASC Topic 820.

The following table summarizes the provision for impairment during the periods indicated below (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
Total provision for impairmentTotal provision for impairment$— $363 $3,539 $1,773 Total provision for impairment$— $— $1,114 $3,539 
Number of properties: (1)
Number of properties: (1)
Number of properties: (1)
Classified as held for saleClassified as held for sale— 2 3 4 Classified as held for sale— — — 3 
Disposed within the periodDisposed within the period— — 3 1 Disposed within the period— — 1 3 

(1)     Includes the number of properties that were impaired and classified as held for sale as of year-end or impaired and disposed of during the respective periods. Excludes properties that did not have impairment recorded during the year.

Cash, Cash Equivalents and Restricted Cash

The Company considers all cash balances, money market accounts and highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Restricted cash includes cash restricted for property tenant improvements and cash proceeds from the sale of assets held by qualified intermediaries in anticipation of the acquisition of replacement properties in tax-free exchanges under Section 1031 of the Code. Restricted cash is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheets. The Company had no restricted cash as of September 30, 2021 and had $14.8 million of restricted cash as of2022 or December 31, 2020.2021.

The Company’s bank balances as of September 30, 20212022 and December 31, 20202021 include certain amounts over the Federal Deposit Insurance Corporation limits.

Revenue Recognition and Related Matters

The Company’s rental revenue is primarily related to rent received from tenants under leases accounted for as operating leases. Rent from leases that have fixed and determinable rent increases is recognized on a straight-line basis over the non-cancellable initial term of the lease and reasonably certain renewal periods, from the later of the date of the commencement of the lease or the date of acquisition of the property subject to the lease. The difference between rental revenue recognized and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and included as a component of other assets in the condensed consolidated balance sheets.

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Variable lease revenues include tenant reimbursements, lease termination fees, changes in the index or market-based indices after the inception of the lease or percentage rents. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. The Company recognized variable lease revenue related to tenant reimbursements and lease termination fees for the periods presented.

Capitalized above-market and below-market lease values and lease incentives are amortized on a straight-line basis as a reduction or increase of rental revenue as appropriate over the remaining non-cancellable terms of the respective leases.

Reserves for uncollectible amounts are provided against the portion of accounts receivable, net including straight-line rents, which areis estimated to be uncollectible, which includeincludes a portfolio-based reserve and reserves for specificspecifically disputed amounts. Such reserves are reviewed each period based upon recovery experience and the specific facts of each outstanding amount. As of September 30, 20212022 and December 31, 2020, there were no reserves2021, the Company had an immaterial reserve for uncollectible amounts.amounts specific to uncharged reimbursable expenses.
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Mortgage Loans Receivable

The Company holds loans receivable, which are mortgage loans secured by real estate, for long-term investment. Loans receivable are carried at amortized cost.

The Company recognizes interest income on loans receivable using the effective-interest method. Direct costs associated with originating loans, along with any premium or discount, is deferred and amortized as an adjustment to interest income over the term of the related loan receivable using the effective interest method. The Company evaluates its loan receivable balances, including accrued interest, for potential credit losses by analyzing the credit of the borrower, the remaining time to maturity of the loan, collateral value and quality (if any), and other relevant factors. A loan receivable is placed on nonaccrual status when management determines that full recovery of the contractually specified payments of principal and interest is doubtful.

Stock-Based Compensation

The Company has a share-based compensation award program for itsour employees and directors. Stock-based compensation expense associated with these awards is recognized in general and administrative expenses in theour condensed consolidated statements of operations and comprehensive income (loss). The Company classifiesincome. We classify stock-based payment awards either as equity awards or liability awards based upon an analysis of ASC 718 and ASC 480. Equity classified awards are measured based on the fair value on the date of grant. Liability classified awards are remeasured to fair value each reporting period. Stock-based compensation expense is recognized over the requisite service or performance period. The Company recognizes forfeitures as they occur.

Forward Equity Sales

The Company sells shares of common stock through forward sale agreements from time to time to enable the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company.

To account for the forward sale agreements, the Company considers the accounting guidance governing financial instruments and derivatives. To date, the Company has concluded that its forward sale agreements are not liabilities as they do not embody obligations to repurchase its shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to its shares. The Company then evaluates whether the agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments. The Company has concluded that the agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies are based on observable markets or indices besides those related to the market for the Company’s own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to its own stock.

The Company also considers the potential dilution resulting from the forward sale agreements on the earnings per share calculations. Prior to settlement, a forward sale agreement will be reflected in the diluted earnings per share calculations using the treasury stock method. Under this method, the number of shares of the Company’s common stock used in diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of the Company’s common stock that would be issued upon full physical settlement of such forward sale agreement over the number of shares of the Company’s common stock that could be purchased by the Company in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period). Consequently, prior to settlement of a forward sale agreement, there will be no dilutive effect on the Company’s earnings per share except during periods when the average market price of the Company’s common stock is above the adjusted forward sale price. However, upon settlement of a forward sales agreement, if the Company’s elects to physically settle or net share settle such forward sale agreement, delivery of the Company’s shares will result in dilution to the Company’s earnings per share.

Transaction Costs

Transaction costs represent costs incurred by the Company to facilitate the private offering, formation transactions and initial public offering. In addition, transaction costs include the costs associated with abandoned acquisitions and other acquisition related activity. There were no offering costs expensed during the three or nine months ended September 30, 2021. Offering costs expensed for the three and nine months ended September 30, 2020 were $0.9 million and $2.2 million, respectively. Acquisition related expenses were $0.1 million and $0.4$0.1 million for the three months ended September 30, 2022 and 2021, respectively, and 2020, respectively. Acquisitionrepresent acquisition related expenses, including costs associated with abandoned acquisitions. Transaction costs were $0.5$0.7 million and $0.8$0.5 million for the nine months ended September 30, 20212022 and 2020, respectively.2021.


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Income Taxes

The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its shareholdersstockholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution and share ownership tests. The Company intends to make sufficient distributions during 20212022 to receive a full dividends paid deduction.

NETSTREIT TRS is treated as a taxable REIT subsidiary which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREIT TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business.

During the three and nine months ended September 30, 2021, theThe Company recognizedrecognizes franchise and other state and local tax expenses in general and administrative and recognized state and federal income tax expense in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).income.

All provisions for federal income taxes in the accompanying condensed consolidated financial statements are attributable to NETSTREIT TRS. Deferred income tax expense and its ending balance inrelated deferred tax assets and liabilities were immaterial for the threeyears and nine months ended September 30, 2021 and 2020.periods presented.

The Company has elected to record related interest and penalties, if any, as general and administrative expense or as income tax expense based on the nature of the tax on the condensed consolidated statements of operations and comprehensive income (loss).income. The Company had no material interest or penalties relating to income, franchise, and other state and local taxes for the threeyears and
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nine months ended September 30, 2021 and 2020. periods presented. Additionally, there were no material accruals for interest or penalties as of September 30, 20212022 and December 31, 2020.2021.

The Company files federal, state and local income tax returns. The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the condensed consolidated financial statements.

All federal tax returns for years prior to 20182019 are no longer subject to examination. Additionally, state tax returns for years prior to 20162017 are generally no longer subject to examination.

Earnings Per Share

Earnings per common share has been computed pursuant to the guidance in FASB ASC Topic 260, Earnings per Share. Basic earnings per share (“EPS”) is computed by dividing net income (loss) allocated to common stockholders by the weighted-average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. No effect is shown for any securities that are anti-dilutive. Net income (loss) allocated to common stockholders represents net income (loss) less income allocated to participating securities and noncontrolling interests. None of the Company’s equity awards are participating securities.

Fair Value Measurement

Fair value measurements are utilized in the accounting of the Company’s assets acquired and liabilities assumed in an asset acquisition and also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs.


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The Company uses the following inputs in its fair value measurements:    

–Level 2 inputs for its debt and derivative financial instrument fair value disclosures. See “Note 6 -– Debt” and “Note 7 -– Derivative Financial Instruments,” respectively; and

–Level 2 and Level 3 inputs when assessing the fair value of assets and liabilities in connection with real estate acquisitions and impairment. See “Note 4 -– Real Estate Investments.”

The fair value of the Company’s cash, cash equivalents and restricted cash (including money market accounts), other assets and accounts payable, accrued expenses and other liabilities approximate their carrying value because of the short-term nature of these instruments. Provisions for impairments recognized in the three and nine months ended September 30, 20212022 and 20202021 related to assets held for sale and the impairment was determined based on the estimated or negotiated selling price, less costs of disposal, compared to the carrying value of the property.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company is exposed to credit risk with respect to cash held at various financial institutions, access to its Credit Facility,credit facilities, amounts due under mortgage loans receivable, and amounts due or payable under derivative contracts. The credit risk exposure with regard to the Company’s cash, credit facilities, and derivative instruments is spread among a diversified group of investment grade financial institutions.

During the three months ended September 30, 2021 and 2020, the Company’s rental revenues were derived from 61 separate tenants leasing 292 total properties and 56 separate tenants leasing 190 properties, respectively. There was no tenant with rental revenue that exceeded 10% of total rental revenue during the three months ended September 30, 2021. During the three months ended September 30, 2020, one tenant, 7-Eleven, accounted for 12.2% of total rental revenue.
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During the nine months ended September 30, 20212022 and 2020, the Company’s rental revenues were derived from 63 separate tenants leasing 297 total properties and 56 separate tenants leasing 190 properties, respectively. During this period2021, there were no tenants with rental revenue that exceeded 10% of total rental revenue.

Segment Reporting

The Company considers each one of its properties to be an operating segment, none of which meets the threshold for a reportable segment. The Company allocates resources and assesses operating performance based on individual property needs. All of the Company’s operating segments meet the aggregation criteria, and thus, the Company reports one segment, rental operations. ThereIn addition, there were no intersegment sales during the periods presented. 

Recent Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04 “Topic 848: Reference Rate Reform.” ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. On July 1, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexedLondon Inter-Bank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company determined these elections have not materially impacted the Company's condensed consolidated financial statements. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models currently required. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted earnings per share calculation in certain areas. Effective January 1, 2022 the Company adopted this standard with no material impact to the condensed consolidated financial statements.


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Note 3 – Leases

The Company acquires, owns and manages commercial single-tenant lease properties, with the majority being long-term triple-net leases where the tenant is generally responsible for all improvements and contractually obligated to pay all operating costs (such as real estate taxes, utilities and repairs and maintenance costs). As of September 30, 2021,2022, the Company owned 290had 406 single-tenant retail net leased propertiesleases spanning 4042 states, with 77 different tenants representing 60 different brands or conceptsrepresented across 2224 retail sectors. As of September 30, 2021,2022, the remaining terms of leases range from 2-321-21 years, with weighted average lease term of 9.6 years.

The Company’s property leases have been classified as operating leases and some have scheduled rent increases throughout the lease term. The Company’s leases typically provide the tenant one or more multi-year renewal options to extend their leases, subject to generally the same terms and conditions, including rent increases, consistent with the initial lease term.

All lease-related income is reported as a single line item, rental revenue (including reimbursable), in the condensed consolidated statements of operations and comprehensive income (loss) and is presented net of any reserves for uncollectible amounts. There were no material reserves for uncollectible amounts during the three and nine months ended September 30, 20212022 and 2020.2021.

The following table provides a disaggregation of lease income recognized under ASC 842 (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Rental revenue
Fixed lease income (1)
$14,010 $8,975 $37,460 $20,833 
Variable lease income (2)
1,434 458 3,290 1,104 
Other rental revenue:
Above/below market lease amortization, net182 219 609 340 
Lease incentives(23)— (26)— 
Rental revenue (including reimbursables)$15,603 $9,652 $41,333 $22,277 

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Rental revenue
Fixed lease income (1)
$21,940 $14,010 $59,661 $37,460 
Variable lease income (2)
2,086 1,434 7,004 3,290 
Other rental revenue:
Above/below market lease amortization, net444 182 1,021 609 
Lease incentives(131)(23)(377)(26)
Rental revenue (including reimbursable)$24,339 $15,603 $67,309 $41,333 
(1)     Fixed lease income includes contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term.
(2) Variable lease income primarily includes tenant reimbursements for real estate taxes, insurance, common area maintenance, and lease termination fees.fees, and the write-off of uncollectible amounts.

Scheduled future minimum base rental payments (excluding base rental payments from properties classified as held for sale and straight linestraight-line rent adjustments for all properties) due to be received under the remaining non-cancelable term of the operating leases in place as of September 30, 20212022 are as follows (in thousands):
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Future Minimum Base
Rental Receipts		Future Minimum Base
Rental Receipts
Remainder of 2021$14,805 
202259,946 
Remainder of 2022Remainder of 2022$22,429 
2023202360,092 202390,548 
2024202460,138 202491,527 
2025202560,025 202590,798 
2026202687,941 
ThereafterThereafter365,112 Thereafter503,378 
$620,118 
TotalTotal$886,621 

Future minimum rentals exclude amounts that may be received from tenants for reimbursements of operating costs and property taxes. In addition, the future minimum rents do not include any contingent rents based on a percentage of the lessees' gross sales or lease escalations based on future changes in the Consumer Price Index (“CPI”) or other stipulated reference rate.


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Corporate Office Lease

In August 2021, the Company entered into a lease agreement on a new corporate office space, which commenced in October 2021 and is classified as an operating lease. The Company began operating out of the new office in February 2022. The lease has a remaining noncancellable lease term of 9.8 years that expires on July 31, 2032, with a one-time option to terminate in 2029 exercisable by the Company. The lease is also renewable at the Company’s option for two additional periods of five years. No renewals were incorporated in the calculation of the corporate lease right-of-use asset and liability as it is not reasonably certain that the Company will exercise the options. Further, the lease agreement does not contain any material residual value guarantees or material restrictive covenants. The corporate office lease contains variable lease costs related to the lease of parking spaces and non-lease components related to the reimbursement of property operating expenses and certain common area maintenance expenses, all of which are recognized as incurred. The Company elected to use the component practical expedient, which permits the Company to not separate non-lease components from lease components if timing and pattern of transfer is the same.

The following table presents the lease expense components for the three and nine months ended September 30, 2022 (in thousands):

Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Operating lease cost$135 $— $406 $— 
Variable lease cost$33 $— $42 $— 

The Company recorded a right-of-use asset and operating lease liability of approximately $4.5 million at lease commencement. As of September 30, 2022, the right-of-use asset and operating lease liability were $4.3 million and $5.5 million, respectively. The right-of-use asset is included in other assets, net and the operating lease liability is included in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for the corporate office lease obligation as of September 30, 2022 (in thousands):

Future Minimum Lease Payments
Remainder of 2022$111 
2023533 
2024617 
2025636 
2026653 
Thereafter3,982 
Total lease payments6,532 
Less: amount representing interest (1)
(1,001)
Present value of operating lease liabilities$5,531 

(1)Imputed interest was calculated using a discount rate of 3.25%. The discount rate is based on the estimated incremental borrowing rate, calculated as the treasury rate for the same period as the underlying lease term, plus a spread determined using factors including REIT industry performance.

Note 4 – Real Estate Investments

As of September 30, 2022, the Company owned or had investments in 409 properties, including six properties currently under development. The gross real estate investment portfolio, including properties under development, totaled approximately $1.4 billion and consisted of the gross acquisition cost of land, buildings, improvements, and lease intangible assets and liabilities. The investment portfolio is geographically dispersed throughout 42 states with gross real estate investments in Illinois and Texas representing 9.8% and 9.4%, respectively, of the total gross real estate investment of the Company’s entire portfolio.

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Acquisitions
    
During the nine months ended September 30, 2022, the Company acquired 82 properties for a total purchase price of $329.0 million, inclusive of $3.2 million of capitalized acquisition costs. During the nine months ended September 30, 2021, the Company acquired 92 properties for a total purchase price of $292.0 million, inclusive of $3.0 million of capitalized acquisition costs. During the nine months ended September 30, 2020, the Company acquired 98 properties for a total purchase price of $327.3 million, inclusive of $3.6 million of capitalized acquisition costs.

The acquisitions were all accounted for as asset acquisitions. An allocation of the purchase price and acquisition costs paid for the completed acquisitions is as follows (in thousands):

Nine Months Ended September 30,Nine Months Ended September 30,
2021202020222021
LandLand$73,600 $98,381 Land$84,248 $73,600 
BuildingsBuildings161,362 166,041 Buildings204,623 161,362 
Site improvementsSite improvements19,844 22,859 Site improvements18,059 19,844 
Tenant improvementsTenant improvements4,663 6,059 Tenant improvements3,046 4,663 
In-place lease intangible assetsIn-place lease intangible assets32,384 44,656 In-place lease intangible assets35,021 32,384 
Above-market lease intangible assetsAbove-market lease intangible assets6,701 4,291 Above-market lease intangible assets2,676 6,701 
Assumed receivablesAssumed receivables44 — Assumed receivables— 44 
Construction-in-progress assets— 270 
Fuel equipment— 156 
298,598 342,713 347,673 298,598 
Liabilities assumedLiabilities assumedLiabilities assumed
Below-market lease intangible liabilitiesBelow-market lease intangible liabilities(6,552)(13,482)Below-market lease intangible liabilities(10,734)(6,552)
Mortgage note payableMortgage note payable(7,913)— 
Accounts payable, accrued expense and other liabilitiesAccounts payable, accrued expense and other liabilities— (1,893)Accounts payable, accrued expense and other liabilities(40)— 
Purchase price (including acquisition costs)Purchase price (including acquisition costs)$292,046 $327,338 Purchase price (including acquisition costs)$328,986 $292,046 

Development

As of September 30, 2022, the Company had six property developments under construction. During the nine months ended September 30, 2021,2022, the Company invested a total$14.3 million in property developments, including the acquisition of $9.5 million, including theone new build-to-suit project with an initial purchase price of $5.4 million, in 5 properties, including one that contains a non-binding purchase option to acquire the property upon completion. Upon acquisition or investment in these properties,$1.0 million. During this nine-month period, the Company commencedcompleted development of build-to-suit projects. Theseon four projects and reclassified approximately $14.7 million from property under development to land, building, and improvements in the accompanying condensed consolidated balance sheets. The remaining six developments in progress are expected to be substantially completed with rent commencing duringat various points through the fourth and first quarter of 2021 and 2022, respectively.2023. The purchase price, including acquisitionsacquisition costs, and subsequent development are included in property under development in the accompanying condensed consolidated balance sheets as of September 30, 2021.2022.

DuringAdditionally, during the first nine months ended September 30, 2020,of 2022 and 2021, the Company invested a totalcapitalized approximately $0.1 million of $4.7 million, including the purchase price of $3.5 million, in 2 properties. Upon acquisition in theseinterest expense associated with properties the Company commenced development of build-to-suit projects which were completed in July and December 2020, respectively. Rent commenced in July 2020 and January 2021,
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respectively. These amounts were included in buildings and improvements in the accompanying condensed consolidated balance sheets as of December 31, 2020.

Dispositionsunder development.

During the nine months ended September 30, 2021, the Company invested a total of $2.6 million in a development project in Yuma, Arizona. The Company exercised its non-binding purchase option to acquire the property upon completion and rent commenced in the second quarter of 2022. This amount, and subsequent development costs, were included in property under development in the accompanying condensed consolidated balance sheets as of December 31, 2021.

During the nine months ended September 30, 2021, the Company also invested a total of $6.9 million, including the purchase price of $5.4 million, in four properties. Upon acquisition, the Company commenced development of four build-to-suit projects, of which three total properties have been completed during the fourth quarter of 2021, the first quarter of 2022, and the second quarter of 2022, respectively. Rent commenced for the three completed developments in 2022. The purchase price, including acquisitions costs, and subsequent development costs are included in property under development in the accompanying condensed consolidated balance sheets as of December 31, 2021.

Dispositions

During the three months ended September 30, 2022, the Company sold 9one property for a total sales price, net of disposal costs, of $1.7 million, recognizing a gain of $0.1 million. During the nine months ended September 30, 2022, the Company sold four properties for a total sales price, net of disposal costs, of $13.8 million, recognizing a gain of $2.2 million.

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During the three months ended September 30, 2021, the Company sold four properties for a total sales price, net of disposal costs, of $18.1 million, recognizing a gain on $2.0 million. During the nine months ended September 30, 2021, the Company sold nine properties for a total sales price, net of disposal costs, of $30.4 million, recognizing a net gain of $2.5 million on the sales.million.

During the nine months ended September 30, 2020, the Company sold 3 properties for a total sales price, net of disposal costs, of $11.8 million, recognizing a net gain of $1.1 million on the sales.Investment in Mortgage Loans Receivable

During 2019,On January 26, 2022, the Company entered into an agreementexecuted a fully collateralized $40.3 million loan receivable with a stated interest rate of 6.0%. The scheduled maturity date is July 26, 2023, however the Company has the right, subject to sell 1 propertycertain terms and conditions, to purchase a third-party and received a nonrefundable $0.3 million earnest money deposit, which uponportion of the third-party’s failure to performunderlying collateralized property. The loan receivable is collateralized by real estate that is leased by three separate investment-grade tenants. The funds provided under the purchase and sale agreementloan, in addition to loan origination costs of $0.1 million, are included in loans receivable, net in the first quarteraccompanying condensed consolidated balance sheets as of 2020, was recognizedSeptember 30, 2022.

On June 30, 2022, the Company executed a fully collateralized $6.0 million loan receivable with a stated interest rate of 6.5%. The scheduled maturity date is June 30, 2023, however the Company has the right, subject to certain terms and conditions, to purchase the underlying collateralized properties. The loan receivable is collateralized by real estate that is leased by two separate tenants, one of which has an investment grade profile. The funds provided under the loan, in addition to loan origination costs of less than $0.1 million, are included in loans receivable, net in the accompanying condensed consolidated balance sheets as a gain.of September 30, 2022.

Note 5 – Intangible Assets and Liabilities

Intangible assets and liabilities consisted of the following (in thousands):

September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Gross
Carrying
Amount		Accumulated AmortizationNet Carrying AmountGross
Carrying
Amount		Accumulated AmortizationNet Carrying AmountGross
Carrying
Amount		Accumulated AmortizationNet Carrying AmountGross
Carrying
Amount		Accumulated AmortizationNet Carrying Amount
Assets:Assets:Assets:
In-place leasesIn-place leases$100,417 $(10,302)$90,115 $69,470 $(4,146)$65,324 In-place leases$148,489 $(24,197)$124,292 $116,368 $(13,408)$102,960 
Above-market leasesAbove-market leases16,145 (1,189)14,956 9,607 (481)9,126 Above-market leases20,022 (2,519)17,503 17,348 (1,516)15,832 
Assembled workforceAssembled workforce873 (519)354 873 (299)574 Assembled workforce873 (812)61 873 (592)281 
Lease incentivesLease incentives4,004 (26)3,978 — — — Lease incentives7,969 (468)7,501 5,821 (122)5,699 
Total Intangible assetsTotal Intangible assets$121,439 $(12,036)$109,403 $79,950 $(4,926)$75,024 Total Intangible assets$177,353 $(27,996)$149,357 $140,410 $(15,638)$124,772 

Liabilities:Liabilities:   Liabilities:   
Below-market leasesBelow-market leases$24,493 $(2,343)$22,150 $17,951 $(1,021)$16,930 Below-market leases$36,143 $(4,705)$31,438 $26,185 $(2,869)$23,316 

The remaining weighted average amortization period forof the Company’s intangible assets and liabilities as of September 30, 20212022 and as of December 31, 20202021 by category were as follows:

Years RemainingYears Remaining
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
In-place leasesIn-place leases9.911.1In-place leases9.69.7
Above-market leasesAbove-market leases13.212.6Above-market leases13.412.8
Below-market leasesBelow-market leases12.813.4Below-market leases11.912.3
Assembled workforceAssembled workforce1.32.0Assembled workforce0.31.0
Lease incentivesLease incentives14.2— Lease incentives12.112.7

The Company records amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and records net amortization of above-market and below-market lease intangibles as well as amortization of lease incentives to rental revenue. The following amounts in the accompanying condensed consolidated statements of operations and comprehensive income (loss) related to the amortization of intangibles assets and liabilities for all property and ground leases (in thousands):

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Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
Amortization:Amortization:Amortization:
Amortization of in-place leasesAmortization of in-place leases$2,444 $1,364 $6,296 $2,896 Amortization of in-place leases$4,201 $2,444 $11,489 $6,296 
Amortization of assembled workforceAmortization of assembled workforce73 73 220 219 Amortization of assembled workforce73 73 220 220 
$2,517 $1,437 $6,516 $3,115 $4,274 $2,517 $11,709 $6,516 
Net adjustment to rental revenue:Net adjustment to rental revenue:Net adjustment to rental revenue:
Above-market lease assetsAbove-market lease assets(346)(122)(723)(370)Above-market lease assets(343)(346)(1,003)(723)
Below-market lease liabilitiesBelow-market lease liabilities528 341 1,332 710 Below-market lease liabilities787 528 2,024 1,332 
Lease incentivesLease incentives(23)— (26)— Lease incentives(131)(23)(377)(26)
$159 $219 $583 $340 $313 $159 $644 $583 
The following table provides the projected amortization of in-place lease assets and assembled workforce intangible assets to amortization expense, and the net amortization of above-market, below-market, and lease incentive lease intangibles to rental revenue as of September 30, 2021,2022, for the next five years and thereafter (in thousands):

Remainder of 20212022202320242025ThereafterTotalRemainder of 20222023202420252026ThereafterTotal
In-place leasesIn-place leases$2,693 $10,772 $10,656 $10,444 $10,250 $45,300 $90,115 In-place leases$4,291 $16,161 $15,389 $14,815 $13,602 $60,034 $124,292 
Assembled workforceAssembled workforce72 282 — — — — 354 Assembled workforce61 — — — — — 61 
Amortization expenseAmortization expense$2,765 $11,054 $10,656 $10,444 $10,250 $45,300 $90,469 Amortization expense$4,352 $16,161 $15,389 $14,815 $13,602 $60,034 $124,353 
Above-market lease assetsAbove-market lease assets(300)(1,199)(1,199)(1,195)(1,194)(9,869)(14,956)Above-market lease assets(351)(1,405)(1,401)(1,400)(1,399)(11,547)(17,503)
Below-market lease liabilitiesBelow-market lease liabilities503 2,014 2,008 1,989 1,969 13,667 22,150 Below-market lease liabilities784 3,075 3,024 3,002 2,910 18,643 31,438 
Lease incentivesLease incentives(90)(286)(286)(286)(286)(2,744)(3,978)Lease incentives(171)(682)(682)(682)(682)(4,602)(7,501)
Net adjustment to rental revenueNet adjustment to rental revenue$113 $529 $523 $508 $489 $1,054 $3,216 Net adjustment to rental revenue$262 $988 $941 $920 $829 $2,494 $6,434 

Note 6 – Debt

Debt consists of the following (in thousands):
September 30, 2021December 31, 2020Maturity DateInterest RateSeptember 30, 2022December 31, 2021
Term Loan (due December 23, 2024)$175,000 $175,000 
Revolver (due December 23, 2023)17,000 — 
Debt:Debt:
Prior RevolverPrior RevolverDecember 23, 2023—$— $64,000 
2024 Term Loan (1)
2024 Term Loan (1)
December 23, 20241.36%175,000 175,000 
New Revolver (2)
New Revolver (2)
August 11, 20263.95%30,000 — 
2028 Term Loan (3)
2028 Term Loan (3)
February 11, 20283.88%200,000 — 
Mortgage NoteMortgage NoteNovember 1, 20274.53%8,534 — 
Total debtTotal debt192,000 175,000 Total debt413,534 239,000 
Unamortized discount and debt issuance costsUnamortized discount and debt issuance costs(726)(895)Unamortized discount and debt issuance costs(2,431)(670)
Unamortized deferred financing costs, net(1)
(897)(1,198)
Unamortized deferred financing costs, net (4)
Unamortized deferred financing costs, net (4)
(2,871)(796)
Total debt, netTotal debt, net$190,377 $172,907 Total debt, net$408,232 $237,534 
(1)Loan is a floating-rate loan which resets monthly at one-month LIBOR plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into four interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022.
(2) The annual interest rate of the New Revolver assumes one-month SOFR as of September 30, 2022 of 2.85% plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.00% as of September 30, 2022. Additionally, the New Revolver may be extended up to one year.
(3) Loan is a floating-rate loan which resets monthly at one-month term SOFR plus a SOFR adjustment of 0.10% plus the applicable margin which was 1.15% as of September 30, 2022. The Company has entered into three interest rate swap agreements that effectively convert the floating rate to the fixed rate noted as of September 30, 2022.
(4) The Company records deferred financing costs for the New Revolver in other assets, net on its condensed consolidated balance sheets.


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New Credit Facility

On August 11, 2022, the Company entered into a sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the “New Revolver”, and together with the 2028 Term Loan, the “New Credit Facility”). The New Credit Facility may be increased by $400.0 million in the aggregate.

The New Revolver refinanced and upsized the Company’s existing $250.0 million senior unsecured revolving credit facility (the “Prior Revolver”) pursuant to the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”).

The Company used the proceeds from the borrowings made on the closing date to repay in full the Prior Revolver. Remaining and future borrowings under the New Revolver will be used by the Company for general corporate purposes of the Company and its subsidiaries, including acquisitions in the Company’s pipeline. The Company’s $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the closing of the New Credit Facility.

The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year. Borrowings under the New Credit Facility are repayable at the Company’s option in whole or in part without premium or penalty. Borrowings under the New Revolver may be repaid and reborrowed from time to time prior to the maturity date.

Prior to the date the Company obtains an investment grade rating, interest rates are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.15% to 1.60%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the credit agreement governing the New Credit Facility (the “New Credit Agreement”)), plus a margin ranging from 0.15% to 0.60%, based on the Company’s consolidated total leverage ratio and (B) in the case of the New Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.00% to 1.45%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.45%, based on the Company’s consolidated total leverage ratio.

After the date the Company obtains an investment grade rating, interest rates are based on the Company’s investment grade rating, and are determined by (A) in the case of the 2028 Term Loan either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.80% to 1.60%, based on the Company’s investment grade rating, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.60%, based on the Company’s investment grade rating and (B) in the case of the New Revolver either (i) SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 0.725% to 1.40%, based on the Company’s investment grade rating, or (ii) a Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 0.00% to 0.40%, based on the Company’s investment grade rating.

Additionally, the Company will incur a facility fee based on the total commitment amount of $400.0 million under the New Revolver. Prior to the date the Company obtains an investment grade rating, the applicable facility fee will range from 0.15% to 0.30% based on the Company’s consolidated total leverage ratio. After the date the Company obtains an investment grade rating, the applicable facility fee will range from 0.125% to 0.30% based on the Company’s investment grade rating.

The New Credit Facility also contains a sustainability-linked pricing component pursuant to which the Company will receive interest rate reductions up to 0.025% based on its performance against a sustainability performance target focused on the portion of the Company’s annualized base rent attributable to tenants with commitments or quantifiable targets for reduced greenhouse gas emission in accordance with the standards of the Science Based Targets initiative (“SBTi”).

The Company has fully hedged the 2028 Term Loan with an all-in interest rate of 3.88%. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rate hedge is further described in “Note 7 – Derivative Financial Instruments.”

In connection with the New Credit Facility, the Company incurred $3.8 million of deferred financing costs which were allocated between the New Revolver and 2028 Term Loan in the amounts of $2.4 million and $1.3 million, respectively. Additionally, $0.5 million of unamortized deferred financing costs associated with the Prior Revolver were reclassed to the New Revolver. Deferred financing costs are amortized over the remaining terms of each respective borrowing and are included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income.

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Prior Credit Facility

In December 2019, the Company entered into the Prior Credit Agreement for a senior credit facility consisting of (i) a $175.0 million senior secured term loan (“Term Loan”)the Prior Revolver and (ii) a $250.0 million senior secured revolving credit facility (“Revolver”, and collectively with the 2024 Term Loan (collectively, the “Credit“Prior Credit Facility”). Wells Fargo Securities, LLC is lead arranger and bookrunner and Wells Fargo Bank, National Association is administrative agent under the Credit Facility (the “Administrative Agent”).

The 2024 Term Loan matures on December 23, 2024 and the Prior Revolver matureswas set to mature on December 23, 2023, subject to extension up to one year. Theyear, prior to the Company using the proceeds from the New Credit Facility is unsecured asto repay the Administrative Agent released the collateralPrior Revolver in connection with the Company’s satisfaction of the collateral release requirements in the fourth quarter of 2020. Therefore interestfull. Interest rates under the Prior Credit Facility are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of the 2024 Term Loan either (i) LIBOR, plus a margin ranging from 1.15% to 1.60%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Prior Credit Facility), plus a margin ranging from 0.15% to 0.60%, based on the Company’s consolidated total leverage ratio and (B) in the case of Revolving Loansthe Prior Revolver either (i) LIBOR, plus a margin ranging from 1.20% to 1.80%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Prior Credit Facility), plus a margin ranging
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from 0.20% to 0.80%, based on the Company’s consolidated total leverage ratio. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The stated interest rate as of September 30, 2021 was 1.25%.

The Company iswas required to pay a Prior Revolver facility fee at an annual rate of 0.15% of the unused capacity if usage exceedsexceeded 50% of the total available facility, or 0.25% of the unused facility if usage doesdid not exceed 50%. Loans from the Prior Revolver arewere generally restricted if, among other things, the proposed usage of the proceeds from the loan dodid not meet certain criteria as outlined in the Prior Credit Facility Agreement, if an event of default exists, or if the requested loan will create an event of default. Loans from the Revolver may not exceed the total revolving commitments.

During the second quarter of 2020, the Company entered into an amendment to the Credit Facility to amend and redefine its debt covenant calculations. The Company incurred and capitalized less than $0.1 million of financing costs relating to this amendment, which has been pro-rated to the Term Loan and Revolver based on their respective borrowing capacities. The Company further amended and redefined its debt covenant calculation during the third quarter of 2021 through the execution of two separate amendments.

Effective September 28, 2020, the Company entered into an interest rate derivative contract to fix the base interest rate (one-month LIBOR) on the 2024 Term Loan. The total interest rate is effectively fixed to 1.36% which includes the fixed base interest rate (one-month LIBOR) of 0.21% plus a leverage-based margin of 1.15%. The interest rate hedge is further described in “Note 7 -– Derivative Financial Instruments.”

During the third quarter of 2022, the Company executed an amendment to the Prior Credit Agreement that governs the 2024 Term Loan, which conformed financial covenants and event of default materiality thresholds to align with those under the New Credit Facility, added a carve-out to the derivatives contracts negative covenant to permit forward sale transactions, and added erroneous payment provisions.

Mortgage Note Payable

As of September 30, 2022, the Company had total gross mortgage indebtedness of $8.8 million, which was collateralized by related real estate and a tenant’s lease with an aggregate net book value of $13.2 million. The Company incurred debt issuance costs of less than $0.1 million and recorded a debt discount of $0.6 million, both of which are recorded as a reduction of the principal balance in mortgage note payable, net on the Company’s condensed consolidated balance sheets.

Debt Maturities

Payments on the 2024 and 2028 Term Loan are interest only through maturity. As of September 30, 2022, scheduled maturities, including balloon payments, are as follows (in thousands):

Scheduled PrincipalBalloon PaymentTotal
Remainder of 2022$38 $— $38 
2023155 — 155 
2024162 175,000 175,162 
2025170 — 170 
2026178 30,000 30,178 
Thereafter170 207,663 207,833 
Total$873 $412,663 $413,536 


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Interest Expense

The following table is a summary of the components of interest expense related to the Company’s borrowings (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revolving credit facilities (1)
$1,222 $154 $2,518 $459 
Term loans1,670 608 2,854 1,801 
Mortgage note payable1 — 1 — 
Non-cash:
Amortization of deferred financing costs153 101 354 302 
Amortization of debt discount, net86 56 199 169 
Capitalized interest(115)(24)(218)(38)
Total interest expense, net$3,017 $895 $5,708 $2,693 

(1) Includes facility fees and non-utilization fees of approximately $0.1 million and $0.2 million for the three months ended September 30, 2022 and 2021, and facility fees of $0.5 million and $0.2 million for the nine months ended September 30, 2022 and 2021.

Deferred financing, discount, and debt issuance costs are being amortized over the remaining terms of each respective loan. Term Loan deferred financing costs of $1.1 million, of which $0.7 millionborrowing and $0.9 million is unamortized at September 30, 2021 and December 31, 2020, respectively, is included within Term Loan, net on the condensed consolidated balance sheets. Revolver deferred financing costs of $1.6 million, of which $0.9 million and $1.2 million is unamortized at September 30, 2021 and December 31, 2020, respectively, is included within other assets, net on the condensed consolidated balance sheets.

Total deferred financing costs amortized on the Term Loan and Revolver for the three months ended September 30, 2021 and 2020 were $0.2 million and $0.2 million, respectively and $0.5 and $0.5 for the nine months ended September 30, 2021 and 2020, respectively. This isare included in interest expense, net on the Company’s condensed consolidated statements of operations and comprehensive income (loss).income.

For the three months ended September 30, 2022 and 2021, and 2020, the Term Loanterm loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and the effects of the interest rate hedge,hedges, of 1.26%3.53% and 1.44%1.26%, respectively and 1.28% and 2.18% forrespectively. For the nine months ended September 30, 2022 and 2021, the term loans had a weighted average interest rate, exclusive of amortization of deferred financing costs and 2020,the effects of interest rate hedges, of 2.49% and 1.28%, respectively.

The Company incurred interest expense in connection with the Term Loan forDuring the three months ended September 30, 2022 and 2021, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs, of 3.28% and 2020 of $0.6 million and $0.6 million, respectively and $1.8 million and $2.9 million for1.26%, respectively. During the nine months ended September 30, 2022 and 2021, the Company incurred interest expense on revolving credit facilities with a weighted average interest rate, exclusive of amortization of deferred financing costs, of 2.29% and 2020,1.24%, respectively.

The estimated fair valuevalues of the Company’s Term Loan hasterm loans have been derived based on market observable inputs such as interest rates and discounted cash flow analysis using estimates of the amount and timing of future cash flows. These measurements are classified as Level 2 within the fair value hierarchy. The Company determined that the carrying value materially approximated the estimated fair value of the Term Loanterm loans as of September 30, 20212022 and December 31, 2020.

The Company incurred interest expense, exclusive of facility fees for unused capacity, on borrowings under the Revolver of less than $0.1 million and approximately $0.1 million for the three months ended September 30, 2021 and 2020 with a weighted average interest rate of 1.26% and 1.54%, respectively. For the nine months ended September 30, 2021 and 2020, interest expense was less than $0.1 million and approximately $0.1 million, with a weighted average interest rate of 1.24% and 1.54%, respectively. As of September 30, 2021, the Company had $17.0 million borrowings outstanding under the Revolver. As of December 31, 2020, the Company had no borrowings outstanding under the Revolver. The Company also incurred interest expense in connection with unused capacity for the three months ended September 30, 2021 and 2020 of $0.2 million and $0.1 million, respectively and $0.5 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

For the three and nine months ended September 30, 2021, the Company capitalized less than $0.1 million of interest expense associated with properties under development. No interest expense was capitalized for the three and nine months ended September 30, 2020.2021.

The Company was in compliance with all of its debt covenants as of September 30, 20212022 and expects to be in compliance for the following twelve-month period.
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Debt Maturity

Payments on the Term Loan are interest only through maturity. All outstanding amounts on the Term Loan are due on December 23, 2024.

Note 7 – Derivative Financial Instruments

The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in Accumulated Other Comprehensive Income (“AOCI”) and the change is reflected as cash flow hedge changes in fair value in the supplemental disclosures of non-cash investing and financing activities in the consolidated statementstatements of cash flows.

Effective September 28, 2020 and September 1, 2022, such derivatives were initiated to hedge the variable cash flows associated with the 2024 Term Loan.Loan and 2028 Term Loan, respectively. Accordingly, the interest rate for the variable rate 2024 Term Loan is based on the hedged fixed rate (one-month) of 0.21% compared to the variable 2024 Term Loan one-month LIBOR rate as of September 30, 20212022 of 0.09%2.56%, plus the applicable margin of 1.15%. The interest rate for the variable rate 2028 Term Loan is based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of September 30, 2022 of 2.51%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15%. The maturity datedates of the interest rate swaps coincide with the respective maturity datedates of the 2024 and 2028 Term Loan.Loans.

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Amounts will subsequently be reclassified to earnings when the hedged item affects earnings. The Company does not enter into derivative contracts for speculative or trading purposes and does not have derivative netting arrangements.

The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company evaluates counterparty credit risk through monitoring the creditworthiness of counterparties, which includes review of debt ratings and financial performance. To mitigate credit risk, the Company enters into agreements with counterparties it considers credit-worthy, such as large financial institutions with favorable credit ratings.

The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments):

Number of InstrumentsNotionalNumber of InstrumentsNotional
Interest Rate DerivativesInterest Rate DerivativesSeptember 30, 2021December 31, 2020September 30, 2021December 31, 2020Interest Rate DerivativesSeptember 30, 2022December 31, 2021September 30, 2022December 31, 2021
Interest rate swapsInterest rate swaps4 4 $175,000 $175,000 Interest rate swaps7 4 $375,000 $175,000 

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 20212022 and December 31, 20202021 (in thousands):

Derivative AssetsDerivative Assets
Fair Value atFair Value at
Derivatives Designated as Hedging Instruments:Derivatives Designated as Hedging Instruments:Balance Sheet LocationSeptember 30, 2021December 31, 2020Derivatives Designated as Hedging Instruments:Balance Sheet LocationSeptember 30, 2022December 31, 2021
Interest rate swapsInterest rate swapsOther assets, net$2,316 $253 Interest rate swapsOther assets, net$25,745 $4,310 

The following table presents the effect of the Company's interest rate swaps on the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)		Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships2021202020212020Derivatives in Cash Flow Hedging Relationships2022202120222021
For the Three Months Ended September 30For the Three Months Ended September 30For the Three Months Ended September 30
Interest Rate ProductsInterest Rate Products$(47)$(129)Interest expense, net$(52)$(1)Interest Rate Products$14,761 $(47)Interest expense, net$874 $(52)
For the Nine Months Ended September 30For the Nine Months Ended September 30For the Nine Months Ended September 30
Interest Rate ProductsInterest Rate Products$1,932 $(129)Interest expense, net$(131)$(1)Interest Rate Products$22,539 $1,932 Interest expense, net$1,103 $(131)

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The Company did not exclude any amounts from the assessment of hedge effectiveness for the three and nine months ended September 30, 20212022 and 2020.2021. During the next twelve months, the Company estimates that an additional $0.1$10.2 million will be reclassified as an increasea decrease to interest expense.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.

To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2021,2022, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its
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derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s derivative liabilitiesassets measured at fair value on a recurring basis as of September 30, 2021,2022, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

Fair Value Hierarchy LevelFair Value Hierarchy Level
DescriptionDescriptionLevel 1Level 2Level 3Total Fair ValueDescriptionLevel 1Level 2Level 3Total Fair Value
September 30, 2021
September 30, 2022September 30, 2022
Derivative assetsDerivative assets$— $2,316 $— $2,316 Derivative assets$— $25,745 $— $25,745 
December 31, 2020
December 31, 2021December 31, 2021
Derivative assetsDerivative assets— 253 — 253 Derivative assets$— $4,310 $— $4,310 

Note 8 – Supplemental Detail for Certain Components of the Condensed Consolidated Balance Sheets

Other assets, net consist of the following (in thousands):

September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Earnest money deposits$1,424 $634 
Accounts receivable, netAccounts receivable, net2,773 1,489 Accounts receivable, net$5,792 $2,801 
Deferred rent receivableDeferred rent receivable1,889 1,407 Deferred rent receivable3,731 2,263 
Prepaid assetsPrepaid assets2,561 356 Prepaid assets1,717 1,473 
Earnest money depositsEarnest money deposits4,539 853 
Fair value of interest rate swapsFair value of interest rate swaps2,316 253 Fair value of interest rate swaps25,745 4,309 
Deferred offering costsDeferred offering costs792 — Deferred offering costs1,153 615 
Deferred financing costs, netDeferred financing costs, net897 1,198 Deferred financing costs, net2,871 796 
Other assets1,419 387 
Right-of-use assetRight-of-use asset4,326 4,581 
Leasehold improvements and other corporate assets, netLeasehold improvements and other corporate assets, net2,045 1,657 
Interest receivableInterest receivable218 — 
Other assets, netOther assets, net1,950 1,003 
$14,071 $5,724 $54,087 $20,351 


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Accounts payable, accrued expenses and other liabilities consists of the following (in thousands):

September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Accrued expensesAccrued expenses$3,813 $2,035 Accrued expenses$6,898 $6,254 
Accrued bonusAccrued bonus1,290 1,561 Accrued bonus1,221 1,742 
Prepaid rentPrepaid rent1,343 1,551 Prepaid rent3,510 1,918 
Operating lease liabilityOperating lease liability5,531 5,442 
Accounts payableAccounts payable1,845 916 Accounts payable430 419 
Other liabilitiesOther liabilities867 245 Other liabilities3,610 1,205 
$9,158 $6,308 $21,200 $16,980 

Note 9 – Shareholders’ Equity, Partners’ Capital and Preferred Equity

Common StockJanuary 2022 Follow-On Offering

On January 13, 2022, the Company completed a registered public offering of 10,350,000 shares of its common stock at a public offering price of $22.25 per share. In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock. As of September 30, 2022, the Company fully physically settled the forward sale agreements (by the delivery of shares of common stock) as follows:

•On September 29, 2022 the Company settled 4,512,003 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. The Company received net proceeds from the offering of $93.5 million,
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net of underwriting discounts and offering costs of $6.9 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 4,512,003 Class A OP Units.

•On June 23, 2022, the Company settled 2,397,035 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. The Company received net proceeds from the offering of $50.0 million, net of underwriting discounts and offering costs of $3.3 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 2,397,035 Class A OP Units.

•On March 30, 2022, the Company settled 3,440,962 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. The Company received net proceeds from the offering of $72.0 million, net of underwriting discounts and offering costs of $4.6 million. The Company contributed the net proceeds to the Operating Partnership in exchange for 3,440,962 Class A OP Units.

August 2022 Follow-On Offering

On August 8, 2022, the Company completed a registered public offering of 9,000,000 shares of its common stock at a public offering price of $20.20 per share which excluded an over-allotment option to the underwriters to purchase an additional 1,350,000 shares, which was exercised on August 10, 2022. In connection with the offering, the Company entered into forward sale agreements for 10,350,000 shares of its common stock. The Company did not initially receive any proceeds from the sales of shares of common stock by the forward purchasers upon registration of the offering. The Company expects to physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than August 3, 2023. The Company may also elect to cash settle or net share settle all or a portion of its obligations under a forward sale agreement if it concludes it is in its best interest to do so over the prescribed offering period. If the Company elects to cash settle a forward sale agreement, it may not receive any proceeds and may owe cash to the relevant forward counterparty in certain circumstances. As of September 30, 2022, 10,350,000 shares remained unsettled under the August 8, 2022 forward sale agreements.

ATM Program

On September 1, 2021, the Company and its Operating Partnership entered into an Equity Distribution Agreement with the financial institutions named therein pursuanta $250.0 million at-the-market equity program (the “ATM Program”) through which, from time to which the Companytime, it may at its discretion, issue and sell shares of its common stock with an aggregate gross offeringin registered transactions. For the nine months ended September 30, 2022, the Company issued 163,774 shares of common stock at a weighted average price of up to $250.0 million (the “ATM Program”). In$22.08 per share in connection with the ATM Program for net proceeds of approximately $3.5 million, net of sales commissions and offering costs of less than $0.1 million. The Company contributed the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, atnet proceeds to the Company's discretion, the forward purchasers may borrow and sell shares of common stock under the ATM Program. The use of forward sale agreements allows the Company to fix a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date. The proceeds from any sale of shares under the ATM program will be usedOperating Partnership in exchange for general corporate purposes, including funding investment activities.163,774 Class A OP Units.

Share Repurchase Authorization

Effective September 1, 2021, the Board of Directors of the Company (the “Board”) authorized a repurchase program for up to $150.0 million of common stock. Repurchases of common stock may be made at management’s discretion from time to time in open market transactions, privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans or one or more accelerated stock repurchase programs). The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors and there can be no assurances that the Company will make any purchases under the common stock repurchase program.

On April 12, 2021, the Company completed a public offering of 10,915,688 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 1,423,785 shares of common stock. Upon closing of the offering, the Company issued 10,915,688 shares of common stock and received net proceeds of $194.2 million after deducting the underwriting discount and transaction costs of $9.4 million. The Company contributed the net proceeds of the offering and related underwriters’ option to the Operating Partnership in exchange for 10,915,688 Class A OP Units.

During the nine months ended September 30, 2021,2022, portions of restricted stock unit awards (“RSUs”) granted to certain of the Company’s officers, directors, and employees vested. The vesting of these awards, granted pursuant to the NETSTREIT Corp. 2019 Omnibus Incentive Compensation Plan (as defined in “Note 10 - Stock-Based Compensation”(the “Omnibus Incentive Plan”), resulted in federal and state income tax liabilities for the recipients. As permitted by the terms of the Omnibus Incentive Plan and the award grants, certain executive officers and employees elected to surrender a total of 1426 thousand shares of common stockRSUs valued at approximately $0.3$0.5 million, solely to pay the associated statutory tax withholding. The surrendered sharesRSUs are included in repurchasethe row entitled “repurchase of shares of common stockstock” on the condensed consolidated statements of cash flows.

On January 30, 2020, the initial purchaser in the Private Offering exercised its over-allotment option to purchase 2,936,885 shares of the Company’s common stock, which were delivered on February 6, 2020. Net proceeds to the Company from the over-allotment option exercise were $54.6 million which was net of initial purchaser’s discount and placement fees of $3.4 million. The over-allotment option exercise resulted in the issuance of 2,936,885 shares of common stock. The Company contributed the net proceeds to the Operating Partnership in exchange for 2,936,885 Class A OP Units.

Preferred Equity

To maintain the Company’s status as a REIT, on January 27, 2020, the Company issued and sold 125 shares of 12.0% Series A Cumulative Non-Voting Preferred Stock, par value $0.01 per share, for $1,000 per share to accredited investors pursuant to Regulation D under the Securities Act. The shares of Series A Preferred Stock may be redeemed solely at the Company’s option for consideration equal to $1,000 per share, plus accrued and unpaid dividends thereon to and including the date fixed for
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redemption, plus a redemption premium as follows (i) until December 31, 2021, $100 and (ii) thereafter, no redemption premium.

In May 2020, the Company declared a preferred dividend of $51.33 per share of Series A Preferred Stock to holders of record as of June 15, 2020. The preferred dividend was settled in cash on June 30, 2020.

The Company redeemed all 125 outstanding shares of Series A Preferred Stock upon the completion of the initial public offering for approximately $0.1 million, which included the payment of accrued dividends for the period from July 1, 2020 to August 18, 2020 and a redemption premium of $100 per share. As of December 31, 2020, there were no shares of preferred stock outstanding.

Dividends

During the nine months ended September 30, 2021,2022, the Company declared and paid the following common stock dividends (in thousands, except per share data):

Declaration DateDividend Per ShareRecord DateTotal AmountPayment Date
March 3, 2021$0.20 March 15, 2021$5,687 March 30, 2021
April 27, 20210.20 June 1, 20217,890 June 15, 2021
July 27, 20210.20 September 1, 20217,916 September 15, 2021
$0.60 $21,493 
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Declaration DateDividend Per ShareRecord DateTotal AmountPayment Date
February 22, 2022$0.20 March 15, 2022$8,888 March 30, 2022
April 26, 20220.20 June 1, 20229,588 June 15, 2022
July 26, 20220.20 September 1, 202210,068 September 15, 2022
$0.60 $28,544 

The holders of OP Units are entitled to an equal distribution per Class A OP Unit and Class B OP Unit held as of each record date. Accordingly, during the nine months ended September 30, 2022 and 2021 the Operating Partnership paid distributions of $0.3 million and $0.9 million, respectively, to holders of OP Units.

Noncontrolling Interests

Noncontrolling interests represent noncontrolling holders of OP Units in the Operating Partnership. OP Units are convertible into common stock as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis. As of September 30, 20212022 and December 31, 2020,2021, noncontrolling interests represented 3.2%0.9% and 5.9%1.3%, respectively of OP Units. During the three months ended September 30, 2022, there were no OP Unit redemptions and during the three months ended September 30, 2021, OP Unit holders redeemed 65,840 OP unitsUnits, into shares of common stock on a one-for-one basis. During the nine months ended September 30, 2022 and 2021, OP Unit holders redeemed 47,894 and 462,357 OP unitsUnits, respectively, into shares of common stock on a one-for-one basis.

Note 10 – Stock-Based Compensation

Under the NETSTREIT Corp. 2019 Omnibus Incentive Compensation Plan (the “Omnibus Incentive Plan”), 2,094,976 shares of common stock are reserved for issuance. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted shares, restricted stock units,RSUs, long-term incentive plan units, dividend equivalent rights, and other share-based, share-related or cash-based awards, including performance-based awards, to employees, directors and consultants, with each grant evidenced by an award agreement providing the terms of the award. The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors.

As of September 30, 2021,2022, the only stock-based compensation granted by the Company were restricted stock units. The total amount of stock-based compensation costs recognized in general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was $1.0$1.3 million and $1.8$1.0 million for the three months ended September 30, 2022 and 2021, and 2020.respectively. Stock-based compensation expense was $3.6 million and $2.6 million for the nine months ended September 30, 20212022 and 2020 was $2.6 million and $1.8 million,2021, respectively. All awards of unvested restricted stock units are expected to fully vest over the next one to five years.


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TablePerformance-Based RSUs (effectiveness of Contents
Performance-Based Restricted Stock Unitsshelf registration)

Pursuant to the Omnibus Incentive Plan, the Company made performance-based restricted stock unit grantsRSUs to certain employees and non-employee directors. The performance condition required the Company to effectively file a shelf registration statement. Up until the point of filing the registration statement, performance was not deemed probable and accordingly, no restricted stock units had the capability of vesting and no stock-based compensation expense was recorded. As a result of the Company's initial public offering in August 2020, the performance condition was satisfied and the Company recorded a stock-based compensation expense catch-up adjustment of $1.4 million. The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next threeone to fivethree years.

The following table summarizes performance-based restricted stock unit activity for the period ended September 30, 2021:2022:

SharesWeighted Average Grant Date Fair Value per Share
Unvested restricted stock grants outstanding as of December 31, 2020207,803 $19.75 
Vested during the period(15,823)19.75 
Unvested restricted stock grants outstanding as of September 30, 2021191,980 $19.75 
SharesWeighted Average Grant Date Fair Value per Share
Unvested restricted stock grants outstanding as of December 31, 2021157,380 $19.75 
Vested during the period(15,823)19.75 
Unvested restricted stock grants outstanding as of September 30, 2022141,557 $19.75 

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For the three and nine months ended September 30, 2021,2022, the Company recognized $0.3$0.2 million and $0.9$0.6 million, respectively, in stock-based compensation expense associated with performance-based restricted stock units. As of September 30, 20212022 and December 31, 2020,2021, the remaining unamortized stock-based compensation expense totaled $1.6$0.8 million and $2.6$1.3 million, respectively and as of September 30, 2021,2022, these awards are expected to be recognized over a remaining weighted average period of 2.21.7 years. These units are subject to graded vesting and stock-based compensation expense is recognized ratably over the requisite service period for each vesting tranche in the award.

The grant date fair value of unvested restricted units is calculated as the per share price determined inon December 23, 2019, through a series of completed transactions (collectively the Private Offering.“Private Offering”).

Service-Based Restricted Stock UnitsRSUs

Pursuant to the Omnibus Incentive Plan, the Company has made service-based restricted stock unit grants to certain employees and non-employee directors. The vesting terms of these grants are specific to the individual grant and vest in equal annual installments over the next one to five years.

The following table summarizes service-based restricted stock unit activity for the period ended September 30, 2021:2022:

SharesWeighted Average Grant Date Fair Value per ShareSharesWeighted Average Grant Date Fair Value per Share
Unvested restricted stock grants outstanding as of December 31, 2020169,793 $18.00 
Unvested restricted stock grants outstanding as of December 31, 2021Unvested restricted stock grants outstanding as of December 31, 2021295,207 $17.84 
Granted during the periodGranted during the period164,076 17.62 Granted during the period148,913 22.09 
Forfeited during the periodForfeited during the period(7,673)17.93 Forfeited during the period(16,030)18.55 
Vested during the periodVested during the period(34,367)18.00 Vested during the period(101,266)17.68 
Unvested restricted stock grants outstanding as of September 30, 2021291,829 $17.79 
Unvested restricted stock grants outstanding as of September 30, 2022Unvested restricted stock grants outstanding as of September 30, 2022326,824 $19.79 

For the three and nine months ended September 30, 2021,2022, the Company recognized $0.5$0.7 million and $1.1$1.9 million, respectively, in stock-based compensation expense associated with service-based restricted stock units. As of September 30, 20212022 and December 31, 2020,2021, the remaining unamortized stock-based compensation expense totaled $4.4$4.6 million and $2.8$4.1 million, respectively, and as of September 30, 2021,2022, these awards are expected to be recognized over a remaining weighted average period of 3.12.3 years. Stock-based compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award.

The grant date fair value of service based unvested restricted units is calculated as the per share price determined in the initial public offering for awards granted in 2020 and as the per share price of the Company’s stock on the date of grant for those granted in 2021.


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Market-Based Restricted Stock UnitsPerformance-Based RSUs (total shareholder return)

Pursuant to the Omnibus Incentive Plan, the Company has made market-based restricted stock unit grants to certain employees. These grants are subject to the participant’s continued service over a three year period with 40% of the award based on the Company’s total shareholder return (“TSR”) as compared to the TSR of 3332 peer companies and 60% of the award based on total absolute TSR over the cumulative three year period. The performance period of these grants runs through March 8, 2024.2024 and February 28, 2025. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility of the Company and each of the Company’s peers and other variables over the performance period. Significant inputs for the calculation were expected volatility of the Company of 42.8%36.3% and expected volatility of the Company's peers, ranging from 28.7% to 90.7%95.3%, with an average volatility of 46.3%46.6% and a risk-free interest rate of 0.34%1.61%. The fair value per share on the grant date specific to the target TSR relative to the Company’s peers was $20.18$26.13 and the target absolute TSR was $16.46$20.42 for a weighted average grant date fair value of $17.77$22.38 per share. Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, which is three years.


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The following table summarizes market-based restricted stock unit activity for the period ended September 30, 2021:2022:

SharesWeighted Average Grant Date Fair Value per ShareSharesWeighted Average Grant Date Fair Value per Share
Unvested restricted stock grants outstanding as of December 31, 2020— $— 
Unvested restricted stock grants outstanding as of December 31, 2021Unvested restricted stock grants outstanding as of December 31, 2021134,467 $17.77 
Granted during the periodGranted during the period135,766 17.77 Granted during the period106,645 22.38 
Forfeited during the periodForfeited during the period(1,299)17.77 Forfeited during the period(2,816)18.65 
Unvested restricted stock grants outstanding as of September 30, 2021134,467 $17.77 
Vested during the periodVested during the period— — 
Unvested restricted stock grants outstanding as of September 30, 2022Unvested restricted stock grants outstanding as of September 30, 2022238,296 $19.82 

For the three and nine months ended September 30, 2021,2022, the Company recognized $0.2$0.4 million and $0.4$1.0 million, respectively, in stock-based compensation expense associated market-based restricted stock units. As of September 30, 2022 and December 31, 2021, the remaining unamortized stock-based compensation expense totaled $2.0$3.0 million and $1.8 million, respectively, and as of September 30, 2021,2022, these awards are expected to be recognized over a remaining weighted average period of 2.42.1 years.

Alignment of Interest Program

25During March 2021, the Company adopted the Alignment of Interest Program (the “Program”), which allows employees to elect to receive a portion of their annual bonus in unvested RSUs in the first quarter of the following year that would then vest over a four-year service period beginning in the period that the bonus relates. The Program is deemed to be a liability-classified award (accounted for as an equity-classified award as the service date precedes the grant date and the award would otherwise be classified as equity on grant date), which will be fair-valued and accrued over the applicable service period. The total estimated fair value of the elections made for 2022 under the Program was approximately $0.9 million. The award will be remeasured to fair value each reporting period until the unvested RSUs are granted. For the three and nine months ended September 30, 2022, the Company recognized approximately $0.1 million and $0.2 million, respectively in stock-based compensation expense associated with these awards. Previous awards under the Program that have been granted are included within service based RSUs above.
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Note 11 – Earnings Per Share

Net income (loss) per common share has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is similarly calculated except that the denominator is increased by using the treasury stock method to determine the potential dilutive effect of the Company’s outstanding unvested restricted stock unitsRSUs and unsettled shares under open forward equity contracts and using the if-converted method to determine the potential dilutive effect of the Company’s OP Units. The Company has noncontrolling interests in the form of OP Units which are convertible into common stock and represent potentially dilutive securities, as the OP Units may be redeemed for cash or, at the Company’s election, exchanged for shares of the Company’s common stock on a one-for-one basis. The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 20212022 and 2020.2021.
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Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except share and per share data)2021202020212020
Numerator:
Net income (loss)2,944 (2,341)1,055 (4,298)
Net (income) loss attributable to noncontrolling interests(96)263 (42)799 
Preferred stock dividends— (36)— (42)
Net income (loss) attributable to common shares, basic2,848 (2,114)1,013 (3,541)
Net income (loss) attributable to noncontrolling interest96 (263)42 (799)
Net income (loss) attributable to common shares, diluted$2,944 $(2,377)$1,055 $(4,340)
Denominator:
Weighted average common shares outstanding, basic39,559,605 18,825,389 35,359,551 13,771,457 
Effect of dilutive shares for diluted net income per common share:
OP Units1,334,571 — 1,462,419 — 
Unvested RSUs439,403 — 286,455 — 
Weighted average common shares outstanding, diluted41,333,579 18,825,389 37,108,425 13,771,457 
Net income (loss) available to common stockholders per common share, basic$0.07 $(0.11)$0.03 $(0.26)
Net income (loss) loss available to common stockholders per common share, diluted$0.07 $(0.11)$0.03 $(0.26)

For the three and nine months ended September 30, 2020, diluted net loss per common share does not assume the conversion of OP Units or unvested RSUs as such conversion would be antidilutive.

For the three months ended September 30, 2020, diluted net loss per common share does not assume the conversion of 4,310,286 OP Units or 24,302 unvested RSUs and for the nine months ended September 30, 2020 does not assume the conversion of 4,402,437 OP Units or 8,101 unvested RSUs.
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except share and per share data)2022202120222021
Numerator:
Net income$1,419 $2,944 $5,395 $1,055 
Net (income) attributable to noncontrolling interest(16)(96)(63)(42)
Net income attributable to common shares, basic1,403 2,848 5,332 1,013 
Net income (loss) attributable to noncontrolling interest16 96 63 42 
Net income attributable to common shares, diluted$1,419 $2,944 $5,395 $1,055 
Denominator:
Weighted average common shares outstanding, basic50,449,735 39,559,605 47,679,870 35,359,551 
Effect of dilutive shares for diluted net income per common share:
OP Units514,890 1,334,571 530,940 1,462,419 
Unvested RSUs255,613 439,403 261,727 286,455 
Unsettled shares under open forward equity contracts164,520 — 184,512 — 
Weighted average common shares outstanding, diluted51,384,758 41,333,579 48,657,049 37,108,425 
Net income available to common stockholders per common share, basic$0.03 $0.07 $0.11 $0.03 
Net income available to common stockholders per common share, diluted$0.03 $0.07 $0.11 $0.03 

As of September 30, 20212022 and December 31, 2020,2021, there were 1,289,525514,890 and 1,751,882562,784 of OP Units outstanding, respectively.

Note 12 – Commitments and Contingencies

Litigation and Regulatory Matters

In the ordinary course of business, from time to time, the Company may be subject to litigation, claims and regulatory matters, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations, liquidity or cash flows.


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Environmental Matters

The Company is subject to environmental regulations related to the ownership of real estate. The cost of complying with the environmental regulations was not material to the Company’s results of operations for any of the periods presented. The Company is not aware of any environmental condition on any of its properties that is likely to have a material adverse effect on the condensed consolidated financial statements when the fair value of such liability can be reasonably estimated and is required to be recognized.

Commitments

In the normal course of business, the Company enters into various types of commitments to purchase real estate properties or fund development projects. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties. Additionally, as of September 30, 2021,2022, the Company had commitments to fund 5six properties under development totaling $16.9$11.2 million of which $9.5 million has been funded to date and the remaining is expected to be funded over the next fivesix months.

In August 2021, the Company entered into a lease agreement on a new corporate office space, which will beis classified as an operating lease. The space is currently undergoing construction with an anticipated move-in date occurringCompany began operating out of the new office in the first quarter ofFebruary 2022. The Company expects to incur approximately $2.2 million of leasehold improvement costs, of which $1.0 million will be refunded by the landlord through tenant allowances. The lease has an initiala remaining noncancellable term of 9.8 years that expires on July 31, 2032 and is renewable at the Company’s option for 2two additional periods of five years each afteryears. Future minimum base rental payments under the initial term.lease are outlined in “Note 3 – Leases.” Annual rent expense, excluding operating expenses, is expected to be approximately $0.5 million during the initial term. Furthermore, the Company’s facilities agreement with EB Arrow terminated effective July 2021 and an occupancy license was executed directly with the building owner of the Company’s current corporate office space. The occupancy license is set to expire in February 2022.

The Company incurred significant damages to a property in Houma, Louisiana as a result of Hurricane Ida making landfall in August 2021. As of September 30, 2021, the Company recorded a loss based on estimated damages of $0.5 million in the accompanying condensed consolidated statements of operations and comprehensive income (loss), which has been fully offset by insurance proceeds deemed probable of recovery. Repair and replacement costs are expected to be approximately $1.3 million which is covered by insurance, less the Company’s $0.1 million deductible. No gain contingency has been realized as of September 30, 2021. The Company anticipates a construction period of three to six months, during which time customer rental payments will be abated. During the abatement period, lost rent is also covered by the Company’s insurance policy.

As of September 30, 2021,2022, the Company did not have any other material commitments for re-leasing costs, recurring capital expenditures, non-recurring building improvements, or similar types of costs.
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During March 2021, the Company executed the Alignment of Interest Program (the “Program”) which allows employees to elect to receive a portion of their 2021 bonus in unvested restricted stock units in the first quarter of 2022 and would vest over a four-year service period beginning April 1, 2021. The Program is deemed to be a liability-classified award (accounted for as an equity-classified award as the service date precedes the grant date and the award would otherwise by classified as equity on grant date) which will be fair-valued and accrued over the applicable service period beginning April 1, 2021. The total estimated fair value of the Program as of September 30, 2021 is approximately $1.0 million. The award will be remeasured to fair value each reporting period. For the three and nine months ended September 30, 2021, the Company recognized approximately $0.1 million in stock-based compensation expense associated with this award.

Note 13 – Related-Party Transactions

Effective with the Private Offering and commencement of the Company’s operations on December 23, 2019, the Company executed a facilities agreement with a subsidiary of EB Arrow Holdings, LLC, (“EB Arrow”), which was subsequently amended in April 2021 and ultimately terminated in July 2021. Under the facilities agreement, the Company shared in office rent by paying a fixed monthly rate and office related expenses based on employee headcount. For the three and nine months ended September 30, 2021, the Company incurred no expenses and for the three months ended September 30, 2020, the Company incurredless than $0.1 million related expenses. For the nine months ended September 30, 2021 and 2020, the Company incurred approximately $0.1 million and $0.2 million in related expenses.


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Note 14 – Subsequent Events
 
The Company has evaluated all events that occurred subsequent to September 30, 20212022 through the date on which these condensed consolidated financial statements were issued to determine whether any of these events required disclosure in the financial statements.

Real Estate Investment Activity

Since September 30, 2021, the Company acquired 12 properties for a total purchase price, including capitalized transaction costs, of $90.0 million.

Common Stock Dividend

On October 26, 2021,25, 2022, the Company's Board of Directors declared a cash dividend of $0.20 per share for the fourth quarter of 20212022 which will be paid on December 15, 20212022 to shareholders of record on December 1, 2021.

Corporate Office Operating Lease

In August 2021, the Company entered into a lease agreement on a new corporate office space, which will be classified as an operating lease. The lease commenced in October 2021, at which point the Company recorded a right-of-use asset and lease liability of approximately $4.6 million.

Revolver Borrowing

In October 2021, the Company borrowed $70.0 million on the Revolver which will be used for general corporate purposes, including the acquisition of properties in the Company’s pipeline.

OP Unit Conversions to Common Stock

There were 7,119 OP Units redeemed for shares of common stock on a one-for-one basis subsequent to September 30, 2021.

2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements concerning our business and growth strategies, investment, financing and leasing activities and trends in our business, including trends in the market for single-tenant, retail commercial real estate. Words such as “expects,” “anticipates,” “intends,” “plans,” “likely,” “will,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Quarterly Report on Form 10-Q may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. For a further discussion of these and other factors that could impact future results, performance or transactions, see the information under the heading “Risk Factors” Part I, Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021February 24, 2022, and other reports filed with the SECSecurities and Exchange Commission from time to time.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties may arise over time and it is not possible for us to predict those events or how they may affect us. Many of the risks identified herein and in our periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the novel coronavirus (COVID-19).and instability in macroeconomic conditions. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.

Overview

We are an internally-managedinternally managed real estate company that acquires, owns and manages a diversified portfolio of single-tenant, retail commercial real estate subject to long-term net leases with high credit quality tenants across the United States. Our diversified operating portfolio consists of 286406 single-tenant retail net leased propertiesleases spanning 4042 states, with 77 different tenants representing 60 different brands or conceptsrepresented across 2224 retail sectors. Our portfolio generates annualized base rent (“ABR”)ABR(1) of $59.8$92.7 million and is 100% occupied, with a weighted average lease term (“WALT”) of 10.09.6 years and consisting of approximately 71%65% and 15%14% of investment grade tenants and investment grade profile tenants, respectively, by ABR, which we believe provides us with a strong, stable source of recurring cash flow. OurWe focus on tenants operate in industries where a physical location is critical to the generation of sales and profits, with a focus on necessity goods and essential services in the retail sector, including home improvement, auto parts, drug stores and pharmacies, general retail, grocers, convenience stores, discount stores, and quick-service restaurants, which we refer to as defensive retail industries. We believe these characteristics make our tenants’tenants' businesses e-commerce resistant and resilient through all economic cycles.

COVID-19

We completedcontinue to monitor the global outbreak of COVID-19 and to take steps to mitigate the potential risks to us posed by the pandemic, including new variants of the virus. In addition, we continue to stay in close contact with our initial public offering on August 17, 2020tenants and monitor the timeliness of rental payments and any significant changes in our common stock trades ontenants' businesses. See “Note 2 – Summary of Significant Accounting Policies” to our condensed consolidated financial statements included herein. The Company’s operations and cash flows for the New York Stock Exchange under the symbol “NTST.”three and nine months ended September 30, 2022 and 2021 were not materially impacted by COVID-19.

(1)Annualized base rent, or ABR, is calculated by multiplying (i) cash rental payments (a) for the month ended September 30, 20212022 (or, if applicable, the next full month's cash rent contractually due in the case of rent abatements, rent deferrals, recently acquired properties and properties with contractual rent increases, other than properties under development) for leases in place as of September 30, 2021,2022, plus (b) for properties under development, the first full month's permanent cash rent contractually due after the development period by (ii) 12.

COVID-19

We continue to monitor the global outbreak of COVID-19 and to take steps to mitigate the potential risks to us posed by the pandemic, including the identification and spread of variants. In addition, we continue to stay in close contact with our tenants and monitor the timeliness of rental payments and any significant changes in our tenants' businesses. See “Note 2 - Summary of Significant Accounting Policies” to our condensed consolidated financial statements included herein. The Company’s operations and cash flows for the three and nine months ended September 30, 2021 and 2020 were not materially impacted by COVID-19.


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Recent Developments2022 Debt Refinancing Transaction

In September 2021, the Company and its Operating PartnershipOn August 11, 2022, we entered into an Equity Distribution Agreementa credit agreement (the “New Credit Agreement”) related to the sustainability-linked senior unsecured credit facility consisting of (i) a $200.0 million senior unsecured term loan (the “2028 Term Loan”) and (ii) a $400.0 million senior unsecured revolving credit facility (the “New Revolver”, and together with the financial institutions named therein2028 Term Loan, the “New Credit Facility”). The New Credit Facility may be increased by $400.0 million in the aggregate.

The New Revolver refinanced and upsized our existing $250.0 million senior unsecured revolving credit facility (“Prior Revolver”) pursuant to the credit agreement, dated as of December 23, 2019, governing such facility (the “Prior Credit Agreement”).

The proceeds of the loans under the New Credit Facility will be used by us and our subsidiaries for general corporate purposes, including acquisitions in our pipeline. We used the proceeds from the borrowings made on the closing date to repay in full our Prior Revolver. Our $175.0 million senior unsecured term loan (“2024 Term Loan”) under the Prior Credit Agreement, which matures in December 2024, remained outstanding upon the Companyclosing of the New Credit Facility.

The 2028 Term Loan matures on February 11, 2028 and the New Revolver matures on August 11, 2026, subject to extension of up to one year. Borrowings under the New Credit Facility are repayable at our option in whole or in part without premium or penalty. Borrowings under the New Revolver may at its discretion, issuebe repaid and sell itsreborrowed from time to time prior to the maturity date.

January 2022 Follow-On Offering

On January 13, 2022, we completed a registered public offering of 10,350,000 shares of common stock with an aggregate grossat a public offering price of up$22.25 per share. In connection with the offering, we entered into forward sale agreements for 10,350,000 shares of common stock. As of September 30, 2022, we fully physically settled the forward sale agreements (by the delivery of shares of common stock) as follows:

•On September 29, 2022 we settled 4,512,003 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. We received net proceeds from the offering of $93.5 million, net of underwriting discounts and offering costs of $6.9 million.

•On June 23, 2022, we settled 2,397,035 shares of common stock at a price of $22.25 per share in accordance with the forward sale agreements. We received net proceeds from the offering of $50.0 million, net of underwriting discounts and offering costs of $3.3 million.

•On March 30, 2022, we settled 3,440,962 shares of common stock at a price of $22.25 per share in connection with the forward sale agreements. We received net proceeds from the offering of $72.0 million, net of underwriting discounts and offering costs of $4.6 million.

August 2022 Follow-On Offering

On August 8, 2022, we completed a registered public offering of 9,000,000 shares of common stock at a public offering price of $20.20 per share which excluded an over-allotment option to the underwriters to purchase an additional 1,350,000 shares, which was exercised on August 10, 2022. In connection with the offering, we entered into forward sale agreements for 10,350,000 shares of common stock. We did not initially receive any proceeds from the sales of shares of common stock by the forward purchasers upon registration of the offering. We expect to physically settle the forward sale agreements (by the delivery of shares of common stock) and receive proceeds from the sale of those shares upon one or more forward settlement dates, which shall occur no later than August 3, 2023. We may also elect to cash settle or net share settle all or a portion of our obligations under a forward sale agreement if we conclude it is in our best interest to do so over the prescribed offering period. If we elect to cash settle a forward sale agreement, we may not receive any proceeds and may owe cash to the relevant forward counterparty in certain circumstances. As of September 30, 2022, 10,350,000 shares remained unsettled under the August 8, 2022 forward sale agreements.


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ATM Program

On September 1, 2021, we entered into a $250.0 million at-the-market equity program (the “ATM Program”). In through which, from time to time, we may sell shares of our common stock in registered transactions. During the nine months ended September 30, 2022, we issued 163,774 shares of common stock at a weighted average price of $22.08 per share in connection with the ATM Program the Company may enter into forward sale agreements with certain financial institutions acting as forward purchasers whereby, at the Company's discretion, the forward purchasers may borrowfor net proceeds of approximately $3.5 million, net of sales commissions and sell sharesoffering costs of common stock under the ATM Program. The use of forward sale agreements allows the Company to fix a share price on the sale of shares of common stock at the time the respective forward sale agreements are executed but defer settling the forward sale agreements and receiving the proceeds from the sale of shares until a later date. The proceeds from any sale of shares under the ATM program will be used for general general corporate purposes, including funding investment activities.

Effective September 1, 2021, the Board of Directors of the Company (the “Board”) authorized a repurchase program for up to $150.0 million of common stock. Repurchases of common stock may be made at management’s discretion from time to time in open market transactions, privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans or one or more accelerated stock repurchase programs). The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors and there can be no assurances that the Company will make any purchases under the common stock repurchase program.less than $0.1 million.

Results of Operations

Overall

The Company continued to grow its assets held for investment during the nine months ended September 30, 2022 by increasing its asset baseproperty portfolio from 203328 properties as of December 31, 20202021 to 290409 properties as of the end of September 30, 2021, inclusive of2022. This includes six real estate development projects owned by the Company. The Company has committed to five real estate development projects with total projected capital spendand two properties fully collateralized by investments in mortgage loans receivable. This growth was financed through the settlement of $16.9shares of common stock through our forward sale agreements in an amount of $215.5 million, the issuance of which $9.5common stock under the ATM Program in an amount of $3.5 million, has been funded asand net borrowings of $149.0 million on our revolving credit facilities during the nine months ended September 30, 2021. This growth has been facilitated by successfully raising $640.5 million of net equity capital as a result of private and public offerings since December 23, 2019.2022.

Acquisitions

During the three months ended September 30, 2021, the Company2022, we acquired 26 retail net lease properties for a total purchase price inclusiveof $121.7 million, including $1.3 million of capitalized acquisition costs, of $86.9 million.costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in 1314 states with a WALT of approximately 12.411.8 years. The underwritten weighted-average capitalization rate on the Company’s third quarter acquisitions was approximately 6.2%6.6%.

During the nine months ended September 30, 2021, the Company2022, we acquired 92 retail net lease82 properties for a total purchase price inclusiveof $329.0 million, including $3.2 million of capitalized acquisition costs, of $292.0 million.costs. The acquisitions were all accounted for as asset acquisitions. These properties are located in 3028 states with a WALT of approximately 10.210.6 years. The underwritten weighted-average capitalization rate on the Company’s year-to-date acquisitions was approximately 6.5%6.6%.

Development

The Company acquired two propertiesDuring the three months ended September 30, 2022, we invested $4.7 million in our property developments.

During the nine months ended September 30, 2022, we invested $14.3 million in our property developments, including the acquisition of one new build-to-suit project with an initial purchase price of $1.0 million. In addition, we completed development on four projects and reclassified approximately $14.7 million from property under development to land, building, and improvements in the third quarter of 2021, and upon acquisition commenced development of build-to-suit projects. These propertiesaccompanying condensed consolidated balance sheets. The remaining six developments are expected to be substantially completed with rent commencing duringat various points through the fourth and first quarter of 20212023. The purchase price, including acquisitions costs, and 2022, respectively. Duringsubsequent development are included in property under development in the three months endedaccompanying condensed consolidated balance sheets as of September 30, 2021, the Company invested a total of $2.5 million in the projects.

The Company acquired or invested in a total of five properties during the nine months ended September 30, 2021, and upon acquisition commenced development of build-to-suit projects. These properties are expected to be substantially completed with rent commencing during the fourth and first quarter of 2021 and 2022, respectively. During the nine months ended September 30, 2021, the Company invested a total of $9.5 million in the projects.2022.

Dispositions

During the three and nine months ended September 30, 2021, the Company2022, we sold four and nine properties, respectively,one property for a total sales price, net of disposal costs, of $18.1$1.7 million, and $30.4 million, respectively, recognizing a gain of $0.1 million. During the nine months ended September 30, 2022, we sold four properties for a total sales price, net of disposal costs, of $13.8 million, recognizing a gain on sale of $2.0$2.2 million.

Investment in Mortgage Loans Receivable

On January 26, 2022, we executed a fully collateralized $40.3 million loan receivable with a stated interest rate of 6.0%. The scheduled maturity date is July 26, 2023, however we have the right, subject to certain terms and $2.5conditions, to purchase a portion of the underlying collateralized property. The loan receivable is collateralized by real estate that is leased by three separate investment-grade tenants. The funds provided under the loan, in addition to loan origination costs of $0.1 million, respectively.are included in loans receivable, net in the accompanying condensed consolidated balance sheets as of September 30, 2022.

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On June 30, 2022, we executed a fully collateralized $6.0 million loan receivable with a stated interest rate of 6.5%. The scheduled maturity date is June 30, 2023, however the Company has the right, subject to certain terms and conditions, to purchase the underlying collateralized properties. The loan receivable is collateralized by real estate that is leased by two separate tenants, one of which is an investment grade profile tenant. The funds provided under the loan, in addition to loan origination costs of less than $0.1 million, are included in loans receivable, net in the accompanying condensed consolidated balance sheets as of September 30, 2022.

Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021

The following table sets forth our operating results for the periods indicated (in thousands):
Three Months Ended
September 30,		Three Months Ended
September 30,
2021202020222021
RevenuesRevenuesRevenues
Rental revenue (including reimbursable)Rental revenue (including reimbursable)$15,603 $9,652 Rental revenue (including reimbursable)$24,339 $15,603 
Interest income on mortgage loans receivableInterest income on mortgage loans receivable674 — 
Total revenuesTotal revenues25,01315,603
Operating expensesOperating expensesOperating expenses
PropertyProperty1,737 624 Property2,539 1,737 
General and administrativeGeneral and administrative3,776 4,109 General and administrative4,552 3,776 
Depreciation and amortizationDepreciation and amortization8,074 4,692 Depreciation and amortization13,407 8,074 
Provisions for impairment— 363 
Transaction costsTransaction costs132 1,241 Transaction costs51 132 
Total operating expensesTotal operating expenses13,719 11,029 Total operating expenses20,549 13,719 
Other income (expense)Other income (expense)Other income (expense)
Interest expense, netInterest expense, net(895)(1,018)Interest expense, net(3,017)(895)
Gain on sales of real estate, netGain on sales of real estate, net1,955 54 Gain on sales of real estate, net143 1,955 
Total other income (expense), netTotal other income (expense), net1,060 (964)Total other income (expense), net(2,874)1,060 
Net income (loss)$2,944 $(2,341)
Net income before income taxesNet income before income taxes1,590 2,944 
Income tax expenseIncome tax expense(171)— 
Net incomeNet income$1,419 $2,944 

Revenue. Revenue for the three months ended September 30, 20212022 increased by $5.9$9.4 million to $15.6$25.0 million from $9.7$15.6 million for the three months ended September 30, 2020.2021. This is primarily due to an increase in the real estate portfolio from 94264 operating properties as of JanuaryJuly 1, 20202021 to 286401 operating properties as of September 30, 2021.2022. The increase includes an increase in cash rental receipts of $5.1$7.8 million, and an increase incombined with net increases of property expense reimbursements of $1.0$0.7 million, offset by combined net decreases of $0.2which $0.5 million inwas related to tax reimbursements, an increase of $0.7 million related to interest income on mortgage loans receivable, an increase of $0.1 million related to straight-line rentrental revenue, and an increase of $0.3 million related to amortization of above- and below-market lease related intangible assets.assets, offset by a decrease of $0.1 million related to amortization of lease incentives.

Total Operating Expenses. Total expenses increased by $2.7$6.8 million to $20.5 million for the three months ended September 30, 2022 as compared to $13.7 million for the three months ended September 30, 2021 as compared to $11.0 million for the three months ended September 30, 2020.2021. The increase in operating expenses is primarily attributed to increasesthe increase in the number of operating properties provisions for impairmentwith the most significant increases being depreciation and amortization expense, property-specific reimbursable expenses, stock-based compensation, expense, offset by prior periodand other general and administrative expenses associated with the consummation of the Company’s initial public offering in August 2020.our growth. Total operating expenses include the following:

•Property Expenses. Property expenses increased $1.1$0.8 million to $2.5 million for the three months ended September 30, 2022 from $1.7 million for the three months ended September 30, 2021 from $0.6 million for the three months ended September 30, 2020.2021. The increase is primarily attributed to the increase in the real estate portfolio from 94264 to 290401 operating properties. The largest increases resultedare from reimbursable property taxes of $0.6$0.5 million, reimbursable insurance expense of $0.2 million, and non-reimbursable insurance expense of $0.1 million, offset by a $0.2 million decrease in reimbursable maintenance expense of $0.3 million.expense.

•General and Administrative Expenses. General and administrative expenses decreased $0.3increased $0.8 million to $4.6 million for the three months ended September 30, 2022 from $3.8 million for the three months ended September 30, 2021 from $4.1 million for the three months ended September 30, 2020.2021. The decreaseincrease is primarily due to a net decreasean increase in stock-based compensation and bonus expense of $0.7$0.3 million and $0.2 million, respectively, associated with the prior period cumulative catch-up recorded upon executing the initial public offering, offset by an increase of $0.2 million in payroll expenses and additional combined increases of $0.3 million in other general expenses.million.

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•Depreciation and Amortization. Depreciation and amortization expense increased $3.4$5.3 million to $13.4 million for the three months ended September 30, 2022 from $8.1 million for the three months ended September 30, 2021 from $4.7 million for the three months ended September 30, 2020.2021. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period primarily with associated increases in building depreciation expense of $1.4$2.4 million, in-place lease amortization expense of $1.1$1.8 million, and building and leasehold improvements depreciation expense of $1.0 million.

•Transaction costs. Transaction costs decreased by less than $0.1 million for the three months ended September 30, 2022 from $0.1 million for the three months ended September 30, 2021 which primarily relates to decreases in costs incurred for abandoned acquisitions.

Interest Expense. Interest expense increased by $2.1 million to $3.0 million for the three months ended September 30, 2022 from $0.9 million for the three months ended September 30, 2021. An increase of $0.8 million is attributed to the increase in the average balances outstanding under the Prior Revolver, an increase of $1.1 million and $0.4 million is attributed to interest incurred under the New Revolver and 2028 Term Loan, respectively, as a result of the New Credit Agreement, and an increase of $0.1 million is attributed to deferred financing cost amortization as a result of the New Credit Facility. This is offset by $0.2 million less of facility fees incurred for unused capacity and $0.1 million of increased capitalized interest on our property developments.

Gain on sales of real estate, net. Net gain on sales of real estate decreased by $1.9 million to $0.1 million for the three months ended September 30, 2022 from $2.0 million for the three months ended September 30, 2021. The table below summarizes the properties sold for the periods indicated (dollars in thousands):
Three Months Ended
September 30,
20222021
Number of properties sold14
Sales price, net of disposal costs$1,660 $18,118 
Gain on sales of real estate, net$143 $1,955 

Income tax expense. Income tax expense increased by $0.2 million for the three months ended September 30, 2022. The increase relates to provisions for federal and state income taxes on the financial results of NETSTREIT Management TRS, LLC (“NETSTREIT TRS”).

Net income. Net income decreased $1.5 million to $1.4 million for the three months ended September 30, 2022 from a net income of $2.9 million for the three months ended September 30, 2021. Net income decreased primarily due to a decrease associated with net gains on the sale of real estate, the impact of increases in depreciation and amortization expenses, increases in interest expense, and increases in general and administrative expenses, as set forth above, offset by increases attributed to the growth in the size of our real estate investment portfolio, which generated additional rental revenues, including interest income associated with our mortgage loans receivable.

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Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

The following table sets forth our operating results for the periods indicated (in thousands):
Nine Months Ended
September 30,
20222021
Revenues
Rental revenue (including reimbursable)$67,309 $41,333 
Interest income on mortgage loans receivable1,671 — 
Total revenues68,980 41,333 
Operating expenses
Property8,156 4,002 
General and administrative13,608 10,904 
Depreciation and amortization36,137 21,078 
Provisions for impairment1,114 3,539 
Transaction costs704 464 
Total operating expenses59,719 39,987 
Other income (expense)
Interest expense, net(5,708)(2,693)
Gain on sales of real estate, net2,162 2,452 
Other income36 — 
Total other expense, net(3,510)(241)
Net income before income taxes5,751 1,105 
Income tax expense(356)(50)
Net income$5,395 $1,055 

Revenue. Revenue for the nine months ended September 30, 2022 increased by $27.7 million to $69.0 million from $41.3 million for the nine months ended September 30, 2021. This is primarily due to an increase in the real estate portfolio from 203 operating properties as of January 1, 2021 to 401 operating properties as of September 30, 2022. The increase includes an increase in cash rental receipts of $21.4 million, combined net increases of property expense reimbursements of $3.7 million, of which $1.9 million was related to tax reimbursements, $1.4 million was related to reimbursable maintenance expenses, and $0.4 million was related to reimbursable insurance expenses, an increase of $1.7 million related to interest income on mortgage loans receivable, an increase of $0.8 million related to straight-line rental revenue, and an increase of $0.4 million related to amortization of above- and below-market lease related intangible assets, offset by a decrease of $0.4 million related to amortization of lease incentives.

Total Operating Expenses. Total expenses increased by $19.7 million to $59.7 million for the nine months ended September 30, 2022 as compared to $40.0 million for the nine months ended September 30, 2021. The increase in operating expenses is primarily attributed to the increase in the number of operating properties with the most significant increases being depreciation and amortization expense, property-specific reimbursable expenses, stock-based compensation, and other general and administrative expenses associated with our growth, offset by fewer provisions for impairment. Total operating expenses include the following:

•Property Expenses. Property expenses increased $4.2 million to $8.2 million for the nine months ended September 30, 2022 from $4.0 million for the nine months ended September 30, 2021. The increase is primarily attributed to the increase in the real estate portfolio from 203 to 401 operating properties. The largest increases are from reimbursable property taxes of $1.9 million, reimbursable maintenance expense of $1.2 million, reimbursable insurance expense of $0.4 million, and a combined net increase in non-reimbursable expenses of $0.7 million.

•General and Administrative Expenses. General and administrative expenses increased $2.7 million to $13.6 million for the nine months ended September 30, 2022 from $10.9 million for the nine months ended September 30, 2021. The increase is primarily due to an increase in stock-based compensation expense of $1.0 million, an increase of in payroll expenses of $0.5 million, increases in professional and consulting expenses of $0.5 million, an increase of $0.2 million in corporate office rent, and additional combined net increases in other general expenses of $0.5 million.

•Depreciation and Amortization. Depreciation and amortization expense increased $15.0 million to $36.1 million for the nine months ended September 30, 2022 from $21.1 million for the nine months ended September 30, 2021. The increase in
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depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period primarily with associated increases in building depreciation expense of $6.5 million, in-place lease amortization expense of $5.2 million, building improvements depreciation expense of $2.7 million, and leasehold improvement depreciation expense of $0.5 million.

•Provision for Impairment. For the threenine months ended September 30, 2021, no provision for impairment was recorded. For the three months ended September 30, 2020,2022, we recorded a provision for impairment of $0.4$1.1 million on twoone property which was also sold during the period. For the nine months ended September 30, 2021, we recorded a provision for impairment of $3.5 million on three properties, all of which were previously classified as held-for-sale as ofand sold before September 30, 2020 and subsequently sold.2021. These impairments and subsequent disposals relate to our plan of strategically identifying properties that can be re-leased or disposed of in an effort to improve returns and manage risk exposure.

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•Transaction costs. Transaction costs decreasedincreased by $1.1$0.2 million to $0.1$0.7 million for the threenine months ended September 30, 2022 from $0.5 million for the nine months ended September 30, 2021 from $1.2 million for the three months ended September 30, 2020. The decrease in transaction costswhich primarily relatesrelate to a decrease of $0.9 million of expenses incurred in 2020 to facilitate our initial public offering in addition to a decreases of $0.2 million in costs incurred for abandoned acquisitions and expenses associated with property acquisitions.

Interest Expense. Interest expense decreasedincreased by $0.1$3.0 million to $0.9$5.7 million for the threenine months ended September 30, 20212022 from $1.0$2.7 million for the threenine months ended September 30, 2020. The decrease2021. An increase of $2.0 million is dueattributed to a lowerthe increase in the average balance in borrowingsbalances outstanding under the Prior Revolver, (as defined in “Note 6 - Debt”an increase of $1.1 million and $0.4 million is attributed to interest incurred under the New Revolver and 2028 Term Loan, respectively, as a result of the New Credit Agreement, and an increase of $0.1 million is attributed to deferred financing cost amortization as a result of the New Credit Facility. This is offset by $0.4 million less of facility fees incurred for unused capacity and $0.2 million of increased capitalized interest on our condensed consolidated financial statements included herein).property developments.

Gain on sales of real estate, net. Net gain on sales of real estate increasedecreased by $1.9$0.3 million to $2.0$2.2 million for the threenine months ended September 30, 20212022 from $0.1$2.5 million for the threenine months ended September 30, 2020.2021. The table below summarizes the properties sold for the periods indicated (dollars in(in thousands):
Nine Months Ended
September 30,
20222021
Number of properties sold49
Sales price, net of disposal costs$13,837 $30,436 
Gain on sales of real estate, net$2,162 $2,452 

Three Months Ended
September 30,
20212020
Number of properties sold41
Sales price, net of disposal costs$18,118 $1,861 
Gain on sales of real estate, net$1,955 $54 
Income tax expense. Income tax expense increased by $0.3 million to $0.4 million for the nine months ended September 30, 2022 from $0.1 million for the nine months ended September 30, 2021. The increase relates to provisions for federal and state income taxes on the financial results of NETSTREIT TRS.

Net income (loss).income. Net income increased $5.2$4.3 million to $2.9$5.4 million for the threenine months ended September 30, 20212022 from a net loss of $2.3$1.1 million for the threenine months ended September 30, 2020.2021. Net income increased primarily due to the growth in the size of our real estate investment portfolio, which generated additional rental revenues, andincluding interest income associated with our mortgage loans receivable, in addition to an increase related to net gains on salesdecreases in provisions for impairment, offset by the impact of real estate, offset partially by increases in depreciation and amortization expenses, increases in interest expense, and to increases in general and administrative expenses, related to both our growth and incremental costs associated with becoming a public company, as set forth above.


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Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

The following table sets forth our operating results for the periods indicated (in thousands):
Nine Months Ended
September 30,
20212020
Revenues
Rental revenue (including reimbursable)$41,333 $22,277 
Operating expenses
Property4,002 1,344 
General and administrative10,904 7,841 
Depreciation and amortization21,078 10,153 
Provisions for impairment3,539 1,773 
Transaction costs464 2,969 
Total operating expenses39,987 24,080 
Other income (expense)
Interest expense, net(2,693)(3,815)
Gain on sales of real estate, net2,452 1,070 
Gain on forfeited earnest money deposit— 250 
Total other expense, net(241)(2,495)
Net income (loss) before income tax expense1,105 (4,298)
Income tax expense(50)— 
Net income (loss)$1,055 $(4,298)

Revenue. Revenue for the nine months ended September 30, 2021 increased by $19.0 million to $41.3 million from $22.3 million for the nine months ended September 30, 2020. This is primarily due to an increase in the real estate portfolio from 94 properties as of January 1, 2020 to 286 properties as of September 30, 2021. The increase includes an increase in cash rental receipts of $17.1 million, combined net increases of property expense reimbursements of $2.5 million, of which $1.3 million was related to tax reimbursements, an increase in amortization of above- and below-market lease related intangible assets of $0.2 million, offset by a decrease in straight-line rental revenue of $0.7 million.

Total Operating Expenses. Total expenses increased by $15.9 million to $40.0 million for the nine months ended September 30, 2021 as compared to $24.1 million for the nine months ended September 30, 2020. The increase in operating expenses is primarily attributed to increases in the number of operating properties, provisions for impairment and stock-based compensation expense, offset by prior period expenses associated with the consummation of the Company’s initial public offering in August 2020. Total operating expenses include the following:

•Property Expenses. Property expenses increased $2.7 million to $4.0 million for the nine months ended September 30, 2021 from $1.3 million for the nine months ended September 30, 2020. The increase is primarily attributed to the increase in the real estate portfolio from 94 to 286 properties. The largest increases are from reimbursable property taxes of $1.3 million, reimbursable maintenance expense of $1.0 million, and reimbursable insurance expenses of $0.3 million.

•General and Administrative Expenses. General and administrative expenses increased $3.1 million to $10.9 million for the nine months ended September 30, 2021 from $7.8 million for the nine months ended September 30, 2020. The increase is primarily due to payroll expense associated with increased management and staff to support the Company as a newly public company of $0.8 million, an increase in stock-based compensation expense of $0.9 million, an increase in insurance related expenses of $0.5 million, an increase in professional and consulting services of $0.5 million, with remaining additional combined net increases in other general expenses.

•Depreciation and Amortization. Depreciation and amortization expense increased $10.9 million to $21.1 million for the nine months ended September 30, 2021 from $10.2 million for the nine months ended September 30, 2020. The increase in depreciation and amortization is proportionate to the increase in the size of the portfolio over the comparable period with associated increases in building depreciation expense of $4.7 million, in-place lease amortization expense of $3.4 million, and building and leasehold improvements depreciation expense of $2.8 million.

•Provision for Impairment. For the nine months ended September 30, 2021, we recorded a provision for impairment of $3.5 million on three properties, one of which was classified as held-for-sale as of December 31, 2020 and sold during the
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period and two of which were classified as held-for-sale and sold during the period. For the nine months ended September 30, 2020, we recorded a provision for impairment of $1.8 million on four properties, which were classified as held-for-sale as of September 30, 2020 and subsequently sold. These impairments and subsequent disposals relate to our plan of strategically identifying properties that can be re-leased or disposed of in an effort to improve returns and manage risk exposure.

•Transaction costs. Transaction costs decreased by $2.5 million to $0.5 million for the nine months ended September 30, 2021 from $3.0 million for the nine months ended September 30, 2020. The decrease in transaction costs includes a decrease of $2.2 million of expenses incurred in 2020 to facilitate our initial public offering and a decrease of $0.3 million of expenses incurred for abandoned acquisitions and expenses associated with property acquisitions.

Interest Expense. Interest expense decreased by $1.1 million to $2.7 million for the nine months ended September 30, 2021 from $3.8 million for the nine months ended September 30, 2020. The decrease is primarily due to the decrease in the effective interest rate of the Term Loan in addition to a decrease in interest expense due to a lower average balance in borrowings outstanding under the Revolver (as defined in “Note 6 - Debt” to our condensed consolidated financial statements included herein).

Gain on sales of real estate, net. Net gain on sales of real estate increased by $1.4 million to $2.5 million for the nine months ended September 30, 2021 from $1.1 million for the nine months ended September 30, 2020. The table below summarizes the properties sold for the periods indicated (in thousands):

Nine Months Ended
September 30,
20212020
Number of properties sold93
Sales price, net of disposal costs$30,436 $11,778 
Gain on sales of real estate, net$2,452 $1,070 

Net income (loss). Net income increased $5.4 million to $1.1 million for the nine months ended September 30, 2021 from a net loss of $4.3 million for the nine months ended September 30, 2020. Net income increased primarily due to growth in the size of our real estate investment portfolio, which generated additional rental revenues, offset partially by an increase in depreciation and amortization expenses, to decreases in interest expense and transaction costs, and to an increase related to net gains on sales of real estate, offset by an increase in provisions for impairment and to increases in general and administrative expenses related to both our growth and incremental costs associated with becoming a public company, as set forth above.

Liquidity and Capital Resources

Our primary capital requirements are to fund property acquisitions and required interest payments, as well as working capital needs, operating expenses, and capital expenditures. Our capital resources primarily consist of cash from operations, sales of equity securities (including private and public offerings) and borrowings under our Prior Credit Facility and New Credit Facility. As of September 30, 2021,2022, we had a $175.0 millionthe 2024 Term Loan, the 2028 Term Loan, and $17.0$30.0 million of borrowings outstanding under our $250.0 millionNew Revolver. Additionally, as of September 30, 2022, we had 10,350,000 shares that were unsettled under open forward equity contracts. We believe that the netavailability of proceeds from future issuances of $194.2 million fromshares of our April 2021 public offeringcommon stock under the ATM Program and the physical settlement of forward sales of our common stock, coupled with our cash flows from operations and available borrowing capacity, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months. We anticipate funding our long-term capital needs through cash provided from operations, borrowings under our New Revolver, and issuances of common stock, including settlement of existing forward sales agreements.

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Contractual Obligations and Commitments

As of September 30, 2021,2022, our contractual debt obligations primarily include the maturity of our $175.0 million2024 Term Loan with the scheduled principal payment due on December 23, 2024, the maturity of our 2028 Term Loan with the scheduled principal payment due on February 11, 2028, and repayment of borrowings on our $250.0 million Revolver.New Revolver with a maturity of August 11, 2026. During the threenine months ended September 30, 2021,2022, we borrowed $17.0$365.0 million on our Revolver at a weighted-average interest rate of 1.26% to fund specifically identified property acquisitions.

Additionally, we previously borrowed and repaid $13.0 million on our Revolverrevolving credit facilities at a weighted average interest rate of 1.24%2.29%, of which $32.0 million was borrowed from the New Revolver to fully pay down the Prior Revolver, with remaining borrowings used to fund specifically identified property acquisitions. A portionWe also repaid $399.0 million on our revolving credit facilities, of which $200.0 million was used from the net proceeds from our April 12, 2021 public offering were used to repayreceived in connection with the borrowing in full.2028 Term Loan.

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The following table provides information with respect to our debt obligations and other commitments as of September 30, 20212022 (in thousands):

Payment Due by Period
TotalFrom October 1, 2021 to December 31, 20211 – 3 Years3 – 5 Years
Contractual Obligations
Term Loan – Principal$175,000$—$—$175,000
Term Loan – Variable interest (1)
7,6705944,7522,324
Revolver - Borrowings17,000—17,000—
Revolver - Variable interest48755432—
Unutilized borrowing fees on Revolver (2)
1,2981461,152—
Total$201,455$795$23,336$177,324
Payment Due by Period
TotalFrom October 1, 2022 to December 31, 20221 – 3 Years3 – 5 YearsThereafter
Contractual Obligations
2024 Term Loan – Principal$175,000$—$175,000$—$—
2024 Term Loan – Variable interest (1)
5,2945944,700——
New Revolver – Borrowings30,000——30,000—
New Revolver – Variable interest4,5752962,3701,909—
Facility Fee (2)
2,3171501,200967—
2028 Term Loan – Principal200,000 — — —200,000 
2028 Term Loan – Variable interest (3)
41,636 1,940 15,522 15,5228,652 
Mortgage Note – Principal8,536 38 317 3487,833 
Mortgage Note – Interest1,901 97 756 726322 
Property development under contract11,236 11,236 — —— 
Corporate office lease obligations6,5321111,1501,2893,982
Total$487,027$14,462$201,015$50,761$220,789

(1)     Effective September 28, 2020, we entered into anfour interest rate hedgehedges to fix the base interest rate (one-month LIBOR) on our 2024 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2024 Term Loan isare based on the hedged fixed rate (one-month) of 0.21% compared to the variable 2024 Term Loan one-month LIBOR rate as of September 30, 20212022 of 0.09%2.56%, plus athe applicable margin of 1.15% based on the $175.0 million 2024 Term Loan outstanding through the maturity date of December 23, 2024.
(2)     We are subject to a variable unutilized borrowingfacility fee of 0.15% on our $250.0New Revolver.
(3) Effective August 11, 2022, we entered into three interest rate hedges to fix the base interest rate (one-month SOFR) on our 2028 Term Loan. Accordingly, the projected interest rate obligations for the variable rate 2028 Term Loan are based on the hedged fixed rate of 2.63% compared to the variable 2028 Term Loan one-month SOFR rate as of September 30, 2022 of 2.51%, plus a SOFR adjustment of 0.10% and applicable margin of 1.15% based on the $200.0 million Revolver. This reflects our projected unutilized borrowing fee at 0.25% assuming no additional borrowing2028 Term Loan outstanding through the maturity date of December 23, 2023.February 11, 2028.

In August 2021, the Company entered into a lease agreement on a new corporate office space, which will beis classified as an operating lease. The space is currently undergoing construction with an anticipated move-in date occurringCompany began operating out of the new office in the first quarter ofFebruary 2022. The Company expects to incur approximately $2.2 million in leasehold improvement costs, of which $1.0 million will be refunded by the landlord through tenant allowances. The lease has an initial noncancellable term of 10.3 years that expires on July 31, 2032 and is renewable at the Company’s option for two additional periods of five years each afteryears. Future minimum base rental payments under the initial term.lease are outlined in “Note 3 – Leases.” Annual rent expense, excluding operating expenses, is expected to be approximately $0.5 million during the initial term.

Additionally, in the normal course of business, the Company enters into various types of commitments to purchase real estate properties or fund development projects. These commitments are generally subject to the Company’s customary due diligence process and, accordingly, a number of specific conditions must be met before the Company is obligated or receives an option to purchase the properties. As of September 30, 2021,2022, the Company had commitments to fund properties under development totaling $16.9$11.2 million, all of which $9.5 million million has been funded to date and the remaining is expected to be funded over the next fivesix months.

Credit Facility

In December 2019, we entered into a Credit Facility consisting of (i) a $175.0 million senior secured Term Loan and (ii) a $250.0 million senior secured Revolver. Wells Fargo Securities, LLC is lead arranger and bookrunner and Wells Fargo Bank, National Association is the Administrative Agent.

The Term Loan matures on December 23, 2024 and the Revolver matures on December 23, 2023, subject to extension up to one year. The Credit Facility is unsecured as the Administrative Agent released the collateral in connection with the Company’s satisfaction of the collateral release requirements in the fourth quarter of 2020. Therefore, interest rates under the Credit Facility are based on the Company’s consolidated total leverage ratio, and are determined by (A) in the case of Term Loan either (i) LIBOR, plus a margin ranging from 1.15% to 1.60%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Facility), plus a margin ranging from 0.15% to 0.60%, based on the Company’s consolidated total leverage ratio and (B) in the case of Revolving Loans either (i) LIBOR, plus a margin ranging from 1.20% to 1.80%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the Credit Facility), plus a margin ranging from 0.20% to 0.80%, based on the Company’s consolidated total leverage ratio. Interest is payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The stated interest rate asAs of September 30, 2022 and December 31, 2021, was 1.25%.

The Company uses interest rate derivative contractswe did not have any off-balance sheet arrangements that have had or are reasonably likely to manage its exposure to changes in interest rateshave a material effect on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Effective September 28, 2020, such derivatives were used to hedge the variable cash flows associated with the Term Loan.


our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.


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Historical Cash Flow Information

Nine Months Ended September 30, 20212022 Compared with Nine Months Ended September 30, 20202021
Nine Months Ended
September 30,		Nine Months Ended
September 30,
2021202020222021
(in thousands)(Unaudited)
(In thousands)(In thousands)(Unaudited)
Net cash provided by (used in):Net cash provided by (used in):Net cash provided by (used in):
Operating activitiesOperating activities$19,206 $5,699 Operating activities$38,706 $19,206 
Investing activitiesInvesting activities(271,963)(316,922)Investing activities(381,188)(271,963)
Financing activitiesFinancing activities187,758 278,914 Financing activities351,069 187,758 

Cash Flows Provided By Operating Activities. Net cash provided by operating activities increased by $13.5$19.5 million for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 2020.2021. The increase was largely attributed to the increase in the size of the Company’s real estate investment portfolio with an increase in rental receipts of $17.1$21.4 million, offset primarily by $4.0 million of lease incentives paid during the period and other increases in operating and general and administrative expenses paid associated with our larger portfolio.

Cash Flows Used In Investing Activities. Net cash used in investing activities decreasedincreased by $44.9$109.2 million for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 2020.2021. The decrease isincrease was primarily due to acquisition increases of $37.0 million, investments in mortgage loans receivable of $46.5 million, increases in real estate development and disposal activity. The Company spent $35.3improvements of $6.0 million, less onincreases in earnest money deposits of $2.7 million, and $16.6 million fewer proceeds received in connection with the acquisition of real estate and received $18.6 million more as a result of disposals, offset by $8.2 million more spent on the developmentsale of real estate.

Cash Flows Provided By Financing Activities. Net cash provided by financing activities decreasedincreased by $91.1$163.3 million for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 2020.2021. The decrease isincrease was primarily attributed to receiving $87.7proceeds received upon execution of the New Credit Agreement, which included $200.0 million lessfrom the 2028 Term Loan and initial proceeds of $32.0 million from the New Revolver, all of which were used to fully pay down the Prior Revolver. The increase is further attributed to incremental net borrowings of $149.0 million under the revolving credit facilities and an increase in net proceeds of $24.8 million received from the April 2021 public offering as compared to the exerciseissuance of the over-allotment optioncommon stock (as further described in “Note 9 – Shareholders’ Equity, Partners’ Capital and Preferred Equity” in the Private Offering in February 2020 and the initial public offering in August 2020. Additionally, the Company paid $19.6Company’s condensed consolidated financial statements). The increase is offset by $6.6 million more of dividends and distributions during the nine months ended September 30, 2021paid in 2022 than the prior period. The Company also borrowed $17.0period and $3.8 million of deferred financing costs paid in relation to the third quarter of 2021 which had not been repaid as of September 30, 2021.New Credit Facility.

Income Taxes

The Company elected to be treated and qualify as a REIT for U.S. federal income tax purposes beginning with its short taxable year ended December 31, 2019. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions of all of its taxable income to its shareholdersstockholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution and share ownership tests. The Company intends to make sufficient distributions during 20212022 to receive a full dividends paid deduction.

NETSTREIT TRS is treated asWe maintain a taxable REIT subsidiary (“TRS”) which may be subject to U.S. federal, state, and local income taxes on its taxable income. In general, NETSTREITour TRS may perform services for tenants of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate-related business.

During the three and nine months ended September 30, 2021,2022, the Company recognized franchise and other state and local tax expenses which are included in general and administrative and recognized state and federal income tax expense which is included in income tax expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).income.

Recent Accounting Pronouncements

A discussion of new accounting standards and the possible effects of these standards on our condensed consolidated financial statements is included in “Note 2 -– Summary of Significant Accounting Policies” of our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


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Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. A summary of our critical accounting policies is included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to these policies during the periods covered by this quarterly report.

Non-GAAP Financial Measures

Our reported results are presented in accordance with GAAP. We also disclose the following non-GAAP financial measures: Funds from operationsFrom Operations (“FFO”), Core FFO, Adjusted FFO (“AFFO”), earnings before interest taxes,expense, income tax expense, and depreciation and amortization (“EBITDA”), EBITDA adjusted to exclude gains (or losses) onfrom the sales of depreciable property and real estate impairment losses (“EBITDAre”EBITDAre”), EBITDAreEBITDAre further adjusted to exclude straight-line rent gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company, and non-cash compensation expense (“Adjusted EBITDAre”EBITDAre”), net operating income (“NOI”) and cash net operating income (“Cash NOI”). We believe these non-GAAP financial measures are industry measures used by analysts and investors to compare the operating performance of REITs.

FFO, Core FFO and AFFO

FFO isThe National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure defined by NAREITof operating performance known as FFO. Our FFO is net income (computed in accordance with GAAP),GAAP, excluding real estate-related expenses including, but not limited to, gains (losses)(or losses) resulting from sales, impairment adjustments, anddispositions of properties, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.impairment charges on depreciable real property.

Core FFO is a non-GAAP financial measure defined as FFO adjusted for gains from forfeited earnest money deposits and non-recurring public company costs. We believe the presentation of Core FFO provides investors with a metric to assist in their evaluation of our operating performance across multiple periods because it removesremove the effect of unusual and non-recurring items that are not expected to impact our operating performance or operations on an ongoing basis. Historically, these have included gains from forfeited earnest money deposits, non-recurring public company costs, and gains from insurance proceeds.

AFFO is a non-GAAP financial measure defined as Core FFO adjusted for GAAP net income related to non-cash revenues and expenses, such as straight-line rent, amortization of above- and below-market lease-related intangibles, amortization of lease incentives, capitalized interest expense, non-cash compensation expense, and amortization of deferred financing and amortization of loan origination costs.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values historically have risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO to be useful in evaluating potential property acquisitions and measuring operating performance.

We further consider FFO, Core FFO and AFFO to be useful in determining funds available for payment of distributions. FFO, Core FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. You should not consider FFO, Core FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance;performance nor should you consider FFO, Core FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO, Core FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO, Core FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Further, FFO, Core FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO, Core FFO and AFFO.

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The following table sets forth a reconciliation of FFO, Core FFO and AFFO for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Net income (loss)$2,944 $(2,341)$1,055 $(4,298)
Net incomeNet income$1,419 $2,944 $5,395 $1,055 
Depreciation and amortization of real estateDepreciation and amortization of real estate7,994 4,614 20,843 9,926 Depreciation and amortization of real estate13,241 7,994 35,701 20,843 
Provisions for impairmentProvisions for impairment— 363 3,539 1,773 Provisions for impairment— — 1,114 3,539 
Gain on sales of real estate, net(1,955)(54)(2,452)(1,070)
Gain on sale of real estate, netGain on sale of real estate, net(143)(1,955)(2,162)(2,452)
FFOFFO8,983 2,582 22,985 6,331 FFO14,517 8,983 40,048 22,985 
Adjustments:Adjustments:Adjustments:
Gain on forfeited earnest money deposit— — — (250)
144A and IPO transaction costs(1)
— 891 — 2,170 
Gain on insurance proceedsGain on insurance proceeds— — (36)— 
Core FFOCore FFO8,983 3,473 22,985 8,251 Core FFO14,517 8,983 40,012 22,985 
Adjustments:Adjustments:Adjustments:
Straight-line rental revenue(244)(387)(707)(1,417)
Straight-line rent adjustmentsStraight-line rent adjustments(272)(244)(1,144)(707)
Amortization of deferred financing costsAmortization of deferred financing costs157 157 471 464 Amortization of deferred financing costs239 157 553 471 
Amortization of loan origination costsAmortization of loan origination costs28 — 59 — 
Amortization of above/below market lease intangiblesAmortization of above/below market lease intangibles(182)(219)(609)(340)Amortization of above/below market lease intangibles(444)(182)(1,021)(609)
Amortization of lease incentivesAmortization of lease incentives23 — 26 — Amortization of lease incentives131 23 377 26 
Capitalized interest expenseCapitalized interest expense(24)— (38)— Capitalized interest expense(115)(24)(218)(38)
Non-cash compensation expenseNon-cash compensation expense1,025 1,753 2,623 1,753 Non-cash compensation expense1,302 1,025 3,645 2,623 
AFFOAFFO$9,738 $4,777 $24,751 $8,711 AFFO$15,386 $9,738 $42,263 $24,751 

(1)     EBITDA, EBITDAThese expenses represent a subset of transaction costs as presented on the condensed consolidated statements of operations and comprehensive income (loss).re

EBITDA, EBITDAre and Adjusted EBITDAreEBITDAre

We compute EBITDA as earnings before interest expense, income taxestax expense, and depreciation and amortization. In 2017, NAREIT issued a white paper recommending that companies that report EBITDA also report EBITDAre. We compute EBITDAre in accordance with the definition adopted by NAREIT. NAREIT defines EBITDAre as EBITDA (as defined above) excluding gains (or losses) from the sales of depreciable property and impairment charges on depreciable real estate impairment losses.property.

Adjusted EBITDAre is a non-GAAP financial measure defined as EBITDAre further adjusted to exclude straight-line rent, gains from forfeited earnest money deposits, non-recurring public company costs, representing consulting fees that we have incurred in preparing to become a public company and non-cash compensation expense.expense, and gain on insurance proceeds.

We present EBITDA, EBITDAre and Adjusted EBITDAre as they are measures commonly used in our industry. We believe that these measures are useful to investors and analysts because they provide supplemental information concerning our operating performance, exclusive of certain non-cash items and other costs. We use EBITDA, EBITDAre and Adjusted EBITDAre as measures of our operating performance and not as measures of liquidity.

EBITDA, EBITDAre and Adjusted EBITDAre do not include all items of revenue and expense included in net income, they do not represent cash generated from operating activities and they are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operations as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures. Additionally, our computation of EBITDA, EBITDAre and Adjusted EBITDAre may differ from the methodology for calculating these metrics used by other equity REITs and, therefore, may not be comparable to similarly titled measures reported by other equity REITs.


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The following table sets forth a reconciliation of EBITDA, EBITDAre and Adjusted EBITDAre for the periods presented to net income (loss) before allocation to noncontrolling interests, as computed in accordance with GAAP (in thousands):

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Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
(Unaudited)(Unaudited)
Net income (loss)$2,944 $(2,341)$1,055 $(4,298)
Depreciation and amortization of real estate7,994 4,614 20,843 9,926 
Amortization of above/below market lease intangibles(182)(219)(609)(340)
Amortization of lease incentives23 — 26 — 
Non-real estate depreciation and amortization79 77 234 228 
Interest expense, net895 1,018 2,693 3,815 
Income tax expense— — 50 — 
EBITDA11,753 3,149 24,292 9,331 
Adjustments:
Provisions for impairment— 363 3,539 1,773 
Gain on sales of real estate, net(1,955)(54)(2,452)(1,070)
EBITDAre
9,798 3,458 25,379 10,034 
Adjustments:
Straight-line rental revenue(244)(387)(707)(1,417)
Gain on forfeited earnest money deposit— — — (250)
144A and IPO transaction costs(1)
— 891 — 2,170 
Non-cash compensation expense1,025 1,753 2,623 1,753 
Adjusted EBITDAre
$10,579 $5,715 $27,295 $12,290 

(1)     These expenses represent a subset of transaction costs as presented on the condensed consolidated statements of operations and comprehensive income (loss).
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
(Unaudited)(Unaudited)
Net income$1,419 $2,944 $5,395 $1,055 
Depreciation and amortization of real estate13,241 7,994 35,701 20,843 
Amortization of above/below market lease intangibles(444)(182)(1,021)(609)
Amortization of lease incentives131 23 377 26 
Non-real estate depreciation and amortization166 79 436 234 
Interest expense, net3,017 895 5,708 2,693 
Income tax expense171 — 356 50 
Amortization of loan origination costs28 — 59 — 
EBITDA17,729 11,753 47,011 24,292 
Adjustments:
Provision for impairments— — 1,114 3,539 
Gain on sale of real estate, net(143)(1,955)(2,162)(2,452)
EBITDAre
17,586 9,798 45,963 25,379 
Adjustments:
Straight-line rent adjustments(272)(244)(1,144)(707)
Gain on insurance proceeds— — (36)— 
Non-cash compensation expense1,302 1,025 3,645 2,623 
Adjusted EBITDAre
$18,616 $10,579 $48,428 $27,295 

NOI and Cash NOI

NOI and Cash NOI are non-GAAP financial measures which we use to assess our operating results. We compute NOI as net income (loss) (computed in accordance with GAAP), excluding general and administrative expenses, interest expense (or income), income tax expense, depreciation and amortization, gains (or losses) onfrom the sales of depreciable property, gain from forfeited earnest money depositsimpairment charges on depreciable real property, transaction costs, and real estate impairment losses.other income (or expense). We further adjust NOI for non-cash revenue components of straight-line rent and amortization of lease intangibles and lease incentives to derive Cash NOI. We believe NOI and Cash NOI provide useful and relevant information because they reflect only those income and expense items that are incurred at the property level and present such items on an unlevered basis.

NOI and Cash NOI are not measurements of financial performance under GAAP, and our NOI and Cash NOI may not be comparable to similarly titled measures of other companies. You should not consider our NOI and Cash NOI as alternatives to net income or cash flows from operating activities determined in accordance with GAAP.


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The following table sets forth a reconciliation of NOI and Cash NOI for the periods presented (in thousands):

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Net income (loss)$2,944 $(2,341)$1,055 $(4,298)
Net incomeNet income$1,419 $2,944 $5,395 $1,055 
General and administrativeGeneral and administrative3,776 4,109 10,904 7,841 General and administrative4,552 3,776 13,608 10,904 
Depreciation and amortizationDepreciation and amortization8,074 4,692 21,078 10,153 Depreciation and amortization13,407 8,074 36,137 21,078 
Provisions for impairmentProvisions for impairment— 363 3,539 1,773 Provisions for impairment— — 1,114 3,539 
Transaction costsTransaction costs132 1,241 464 2,969 Transaction costs51 132 704 464 
Interest expense, netInterest expense, net895 1,018 2,693 3,815 Interest expense, net3,017 895 5,708 2,693 
Gain on sales of real estate, netGain on sales of real estate, net(1,955)(54)(2,452)(1,070)Gain on sales of real estate, net(143)(1,955)(2,162)(2,452)
Gain on forfeited earnest money deposit— — — (250)
Income tax expenseIncome tax expense— — 50 — Income tax expense171 — 356 50 
Interest income on mortgage loans receivableInterest income on mortgage loans receivable(674)— (1,671)— 
Other incomeOther income— — (36)— 
NOINOI13,866 9,028 37,331 20,933 NOI21,800 13,866 59,153 37,331 
Straight-line rental revenue(244)(387)(707)(1,417)
Straight-line rent adjustmentsStraight-line rent adjustments(272)(244)(1,144)(707)
Amortization of above/below market lease intangiblesAmortization of above/below market lease intangibles(182)(219)(609)(340)Amortization of above/below market lease intangibles(444)(182)(1,021)(609)
Amortization of lease incentivesAmortization of lease incentives23 — 26 — Amortization of lease incentives131 23 377 26 
Cash NOICash NOI$13,463 $8,422 $36,041 $19,176 Cash NOI$21,215 $13,463 $57,365 $36,041 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair value relevant to our financial instruments depends upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Based upon the nature of our operations, the principal market risk to which we are exposed is the risk related to interest rate fluctuations. As of September 30, 2021,2022, we had total indebtedness of approximately $175.0 million under the 2024 Term Loan, $200.0 million under the 2028 Term Loan, and $17.0$30.0 million of borrowings under the New Revolver, bothall of which are floating rate debt with a variable interest rate. For the three and nine months ended September 30, 2021,2022, we had average daily outstanding borrowings on our Revolverrevolving credit facilities of $0.4$137.1 million and $0.8$135.1 million, respectively.
On September 28, 2020 and August 11, 2022 and effective through the maturity datedates of December 23, 2024 and February 11, 2028, respectively, the Company entered into an interest rate derivative contracts in order to hedge its market interest risk associated with the 2024 Term Loan.Loan and the 2028 Term Loan, respectively. The interest rate derivative convertscontracts convert the variable rate debt on the Term Loanterm loans to a fixed interest rate of 0.21%, plus a margin of 1.15%(as further described in “Note 6 – Debt” in the Company’s condensed consolidated financial statements). Additionally, we will occasionally fund acquisitions through the use of our New Revolver which bears an interest rate determined by either (i) LIBOR,SOFR, plus a SOFR adjustment of 0.10%, plus a margin ranging from 1.20%1.00% to 1.80%1.45%, based on the Company’s consolidated total leverage ratio, or (ii) a Base Rate (as defined in the New Credit Facility), plus a margin ranging from 0.20%0.00% to 0.80%0.45%, based on the Company’s consolidated total leverage ratio. During the year, we also funded acquisitions through the use of our Prior Revolver, which was fully paid down in conjunction with the execution of the New Credit Agreement. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to our interest rate risk. Based on the results of our sensitivity analysis and daily outstanding borrowings on the New Revolver during 2021,2022, which assumes a 1% adverse change in the interest rate as of September 30, 2021,2022, the estimated market risk exposure for the New Revolver was less thanapproximately $0.1 million.

On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that USD LIBOR will no longer be published after June 30, 2023. This announcement has several implications, including setting the spread that may be used to automatically convert contracts from LIBOR to the Secured Overnight Financing Rate ("SOFR"(“SOFR”). Additionally, banking regulators are encouraging banks to discontinue new LIBOR debt issuances byprior to December 31, 2021.

The Company anticipates that LIBOR will continue to be available at least until June 30, 2023. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

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The Company’s 2024 Term Loan, and Revolver, which maturematures on December 23, 2024, and December 23, 2023, respectively, areis indexed to LIBOR.LIBOR, and provides for procedures for determining an alternative base rate. The Company continues to monitor and evaluate the related risks, including future negotiations with lenders and other counterparties. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur, and are likely to vary by contract. The value of loans, securities, or derivative instruments tied to LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if LIBOR is
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limited or discontinued. For some instruments the method of transitioning to an alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make the transition.

While we expect LIBOR to be available in substantially its current form until at least the end of June 30, 2023, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

Alternative rates and other market changes related to the replacement of LIBOR, including the introduction of financial products and changes in market practices, may lead to risk modeling and valuation challenges, such as adjusting interest rate accrual calculations and building a term structure for an alternative rate.

The introduction of an alternative rate also may create additional basis risk and increased volatility as alternative rates are phased in and utilized in parallel with LIBOR.

Adjustments to systems and mathematical models to properly process and account for alternative rates will be required, which may strain the model risk management and information technology functions and result in substantial incremental costs for the company.

Off-Balance Sheet Arrangements
As of September 30, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

Item 4. Controls and Procedures

Disclosure Controls and Procedures.

At the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that its disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Control over Financial Reporting.

During the period covered by this report, there have been no changes in our internal control over financial reporting identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently subject to any lawsuits, claims, or other legal proceedings.

Item 1A. Risk Factors

For a discussion of the most significant factors that may adversely affect us, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to the risk factors disclosed in the Annual Report. These risk factors may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Company Stock Repurchases

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

Exhibit No.Description
10.1*3.1
Articles of Amendment and Restatement of NETSTREIT Corp. (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-11 (File No. 4333-239911) filed on July 17, 2020).
3.2
Articles of Amendment of NETSTREIT Corp. (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on Form S-11 (File No. 333-239911) filed on July 17, 2020).
3.3
Amended and Restated Bylaws of NETSTREIT Corp. (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on August 21, 2020).
10.1#
Credit Agreement, dated as of August 2, 2021,11, 2022, by and between NETSTREIT Corp., NETSTREIT, L.P., the several financial institutions party thereto, PNC Bank, National Association, Wells Fargo Bank, National Association and U.S. Bank, National Association, Capital One, National Association, The Huntington National Bank, Regions Bank, The Bank of Nova Scotia, TD Bank, N.A., and Truist Bank, PNC Capital Markets LLC, U.S. Bank, National Association and Wells Fargo Securities, LLC, and PNC Capital Markets LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 16, 2022).
10.2*#
Conformed Credit Agreement, dated December 23, 2019, by and among NETSTREIT, L.P., NETSTREIT Corp. and, the financial institutions party thereto.
10.2*
thereto, Wells Fargo Bank, National Association, KeyBank National Association and Capital One, National Association, Trust Bank, Bank of Montreal, U.S. Bank National Association, PNC Bank, National Association and Regions Bank (reflecting the inclusion of amendment provisions of all amendments to the Credit Agreement through Amendment No. 5 to Credit Agreement,6, dated August 30, 2021, to Credit Agreement, dated December 23, 2019, by and among NETSTREIT, L.P., NETSTREIT Corp. and the financial institutions party thereto.September 7, 2022).
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**XBRL Instance Document.
101.SCH***XBRL Taxonomy Extension Schema Document.
101.CAL***XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB***XBRL Taxonomy Extension Label Linkbase Document.
101.PRE***XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF***XBRL Taxonomy Extension Definition Linkbase Document.
104**Cover Page Interactive Data File.

*Filed herewith.
**The XBRL Instance Document and Cover Page Interactive Data File do not appear in the Interactive Data File because their XBRL tags are embedded within the Inline XBRL document.
***Submitted electronically with the report.
†Management contract or compensatory plan or arrangement.
#Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

NETSTREIT Corp.
October 28, 202127, 2022/s/ MARK MANHEIMER
DateMark Manheimer
President, Chief Executive Officer and Director
(Principal Executive Officer)
October 28, 202127, 2022/s/ ANDREW BLOCHER
DateAndrew Blocher
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer)
October 28, 202127, 2022/s/ PATRICIA MCBRATNEYGIBBS
DatePatricia McBratneyGibbs
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
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